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The Effects of Cohort Size on European Earnings

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  • Giorgio Brunello

    () (University of Padua)

Abstract

I use the cross-country and time variation in the demographic structure of 11 European countries to study how changes in cohort size affect real earnings in Europe. This is an important question in the light of widespread population ageing. I find that cohort size has a negative and statistically significant effect on earnings, and that this effect is larger for the older age group - aged between 35 and 54 - than for the younger group - aged 20 to 34. I also find that earnings are more sensible to changes in cohort size in Southern Europe, which points to a lower degree of substitutability between individuals with the same education but different age. I argue that the uncovered lower substitutability in the Olive Belt of Europe is in line with the higher employment protection that its workers enjoy, at least compared to the workers located in Northern Europe. One important policy implication of this study is that the demographic shift away from the young and toward the old, a baby bust after a baby boom, is likely to tilt age - earnings profiles in favor of the young more in Southern than in Northern Europe.

Suggested Citation

  • Giorgio Brunello, 2007. "The Effects of Cohort Size on European Earnings," "Marco Fanno" Working Papers 0036, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0036
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    References listed on IDEAS

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    2. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
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    Cited by:

    1. John Moffat & Duncan Roth, 2016. "The Cohort Size-Wage Relationship in Europe," LABOUR, CEIS, vol. 30(4), pages 415-432, December.
    2. Ernesto Amaral & Bernardo Queiroz & Júlia Calazans, 2015. "Demographic changes, educational improvements, and earnings in Brazil and Mexico," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-21, December.
    3. Santiago Budría & Pedro Telhado-Pereira, 2011. "Educational Qualifications And Wage Inequality: Evidence For Europe," Revista de Economia Aplicada, Universidad de Zaragoza, Departamento de Estructura Economica y Economia Publica, vol. 19(2), pages 5-34, Autumn.
    4. Ernesto F. L. Amaral & Eduardo Luiz Goncalves Rios-Neto & Joseph E. Potter, 2015. "The Influence of Internal Migration on Male Earnings in Brazil, 1970-2000," Working Papers WR-1090, RAND Corporation.
    5. Bryson, Alex & Gomez, Rafael & Zhang, Tingting, 2014. "All-Star or Benchwarmer? Relative Age, Cohort Size and Career Success in the NHL," IZA Discussion Papers 8645, Institute for the Study of Labor (IZA).
    6. Duncan Roth & John Moffat, 2014. "Cohort size and youth unemployment in Europe: a regional analysis," ERSA conference papers ersa14p1546, European Regional Science Association.
    7. Kadija Charni & Stephen Bazen, 2017. "Do earnings really decline for older workers?," International Journal of Manpower, Emerald Group Publishing, vol. 38(1), pages 4-24, April.
    8. Jürges, Hendrik, 2012. "Collateral damage: Educational attainment and labor market outcomes among German war and post-war cohorts," MEA discussion paper series 201202, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    9. Newhouse, David & Wolff, Claudia, 2014. "Cohort Size and Youth Employment Outcomes," IZA Discussion Papers 8197, Institute for the Study of Labor (IZA).
    10. Aristei, David & Perugini, Cristiano, 2015. "The drivers of income mobility in Europe," Economic Systems, Elsevier, vol. 39(2), pages 197-224.
    11. repec:ebl:ecbull:eb-17-00465 is not listed on IDEAS
    12. Guido Schwerdt & Jarkko Turunen, 2007. "Changes in Human Capital: Implications for Productivity Growth in the Euro Area," ifo Working Paper Series 53, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Morin, Louis-Philippe, 2015. "Cohort size and youth earnings: Evidence from a quasi-experiment," Labour Economics, Elsevier, vol. 32(C), pages 99-111.
    14. Devereux, Paul J. & Fan, Wen, 2011. "Earnings returns to the British education expansion," Economics of Education Review, Elsevier, vol. 30(6), pages 1153-1166.
    15. Thomas Flochel & Yuki Ikeda & Harry Moroz & Nithin Umapathi, 2014. "Macroeconomic Implications of Aging in East Asia Pacific," World Bank Other Operational Studies 23026, The World Bank.
    16. Sarah Brockhoff & Tim Krieger & Daniel Meierrieks, 2010. "Ties That Do Not Bind (Directly): The Education-Terrorism Nexus Revisited," Working Papers CIE 26, Paderborn University, CIE Center for International Economics.
    17. John Moffat & Duncan Roth, 2014. "Cohort size and youth labour-market outcomes: the role of measurement error," MAGKS Papers on Economics 201440, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    18. Ernesto Friedrich de Lima Amaral & Joseph E. Potter & Daniel Hamermesh & Eduardo Rios-Neto, 2013. "Age, education, and earnings in the course of Brazilian development: Does composition matter?," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 28(20), pages 581-612, March.

    More about this item

    Keywords

    Cohort size; wages; Europe;

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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