Does it pay to be productive? The case of age groups

Arbeitspapier

Using longitudinal matched employer-employee data for the period 1999-2006, we investigate the relationship between age, wage and productivity in the Belgian private sector. More precisely, we examine how changes in the proportions of young (16-29 years), middle-aged (30-49 years) and older (more than 49 years) workers affect the productivity of firms and test for the presence of productivity-wage gaps. Results (robust to various potential econometric issues, including unobserved firm heterogeneity, endogeneity and state dependence) suggest that workers older than 49 are significantly less productive than prime age and young workers. In contrast, the productivity of middle-age workers is not found to be significantly different compared to young workers. Findings further indicate that average hourly wages within firms increase significantly and monotonically with age. Overall, this leads to the conclusion that young workers are paid below their marginal productivity while older workers appear to be overpaid and lends empirical support to theories of deferred compensation over the life-cycle (Lazear, 1979).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5938

Classification and Topics

• Classification: Wirtschaft ; Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination ; Human Capital; Skills; Occupational Choice; Labor Productivity ; Wage Level and Structure; Wage Differentials
• Subject: wages ; productivity ; aging ; matched panel data ; Altersgruppe ; Ältere Arbeitskräfte ; Arbeitsproduktivität ; Lohn ; Schätzung ; Belgien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cataldi, Alessandra ; Kampelmann, Stephan ; Rycx, Francois
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/55054
• URN: urn:nbn:de:101:1-201109286318
• Last update: 10.03.2025, 11:42 AM CET