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Does growth discriminates against older workers?

  • Moreno-Galbis Eva

    (University of Le Mans (GAINS TEPP))

  • LANGOT Francois

    (PSE Paris-Jourdan)

This paper seeks to gain insights on the relationship between growth and employment, particularly when considering heterogeneous agents in terms of age. We introduce in the endogenous job destruction framework ` la Mortensen and Pissarides (1998) life cycle features. a We show that, under the assumption of homogeneous productivity among workers, firms tend to fire more often older workers rather than young ones, when deciding whether to update or not a technology: there is an equilibrium where the creative destruction effect dominates over the capitalization effect for old workers, whereas the capitalization effect dominates for the young workers. This discrimination against older workers can be moderated when we introduce heterogeneity (in terms of productivity) among workers. Indeed, it may be more interesting for the firm to pay the updating cost and train high-productivity old workers, in spite of their advanced age, rather than destroying their job and creating a new one. We also provide empirical support to these theoretical findings using OECD panel data set, and numerical simulations of the model.

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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 590.

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Date of creation: 2008
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Handle: RePEc:red:sed008:590
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  1. Hairault, Jean-Olivier & Langot, François & Sopraseuth, Thepthida, 2006. "The Interaction between Retirement and Job Search: A Global Approach to Older Workers Employment," IZA Discussion Papers 1984, Institute for the Study of Labor (IZA).
  2. Jean-Olivier Hairault & François Langot & Thepthida Sopraseuth, 2008. "Quantifying The Laffer Curve On The Continued Activity Tax In A Dynastic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 755-797, 08.
  3. Aubert Patrick & Caroli Eve & Roger Muriel, 2005. "New Technologies, Workplace Organisation and the Age Structure of the Workforce: Firm-Level Evidence," Research Unit Working Papers 0505, Laboratoire d'Economie Appliquee, INRA.
  4. BEHAGHEL Luc & GREENAN Nathalie, 2007. "Training and age-biased technical change," Research Unit Working Papers 0705, Laboratoire d'Economie Appliquee, INRA.
  5. Hairault, Jean-Olivier & Chéron, Arnaud & Langot, François, 2007. "Job Creation and Job Destruction over the Life Cycle: The Older Workers in the Spotlight," IZA Discussion Papers 2597, Institute for the Study of Labor (IZA).
  6. Ahituv, Avner & Zeira, Joseph, 2002. "Technical Progress and Early Retirement," Working Paper Series rwp02-007, Harvard University, John F. Kennedy School of Government.
  7. repec:hal:wpaper:halshs-00590805 is not listed on IDEAS
  8. Pissarides, Christopher & Vallanti, Giovanna, 2005. "The Impact of TFP Growth on Steady-State Unemployment," CEPR Discussion Papers 5002, C.E.P.R. Discussion Papers.
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