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The Age-Wage-Productivity Puzzle: Evidence from the Careers of Top Earners

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  • Rachel Scarfe

    (School of Economics, University of Edinburgh)

  • Carl Singleton

    (Department of Economics, University of Reading)

  • Adesola Sunmoni

    (Department of Economics, University of Reading)

  • Paul Telemo

    (School of Economics, University of Edinburgh)

Abstract

There is an inverted u-shaped relationship between age and wages in most labour markets and occupations, but the effects of age on productivity are often unclear. We use panel data on productivity and salaries in a market of high earners, professional footballers (soccer players) in North America, to estimate age-productivity and age-wage profiles. We find stark differences between these profiles; wages continue to increase for several years after productivity has peaked, before dropping sharply at the end of a career. This discrepancy poses the question: why are middle-aged workers seemingly overpaid relative to their contemporaneous productivity? The richness of our dataset allows us to investigate a range of possible mechanisms that could be responsible, including institutional factors, unobserved elements of productivity, and a talent discovery theory, by which teams pay younger players less because their productivity is more uncertain. We find some evidence that tentatively supports this last mechanism.

Suggested Citation

  • Rachel Scarfe & Carl Singleton & Adesola Sunmoni & Paul Telemo, 2022. "The Age-Wage-Productivity Puzzle: Evidence from the Careers of Top Earners," Economics Discussion Papers em-dp2022-07, Department of Economics, University of Reading, revised 30 May 2023.
    • Handle: RePEc:rdg:emxxdp:em-dp2022-07
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    Keywords

    Labour productivity; Wages; Aging; Sports Labour Markets;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • Z22 - Other Special Topics - - Sports Economics - - - Labor Issues

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