Ageing and Employability. Evidence from Belgian Firm-Level Data

Mariann Rigo (), Vincent Vandenberghe and Fábio Waltenberg ()
Additional contact information
Mariann Rigo: Department of Economics, Central European University, Budapest and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 2012011, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The Belgian population is ageing due to demographic changes; so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are older workers employable? The answer depends to a large extent on the gap between older workers’ productivity and their cost to employers. To address this question we use a production function that is modified to reflect the heterogeneity of labour with workers of different age potentially diverging in terms of marginal products. Using unique firm-level panel data we produce robust evidence on the causal effect of ageing on productivity (value added) and labour costs. We take advantage of the panel structure of data and resort to first-differences to deal with a potential time-invariant heterogeneity bias. Moreover, inspired by recent developments in the production function estimation literature, we also address the risk of simultaneity bias (endogeneity of firms’ age-mix choices in the short run) using i) the structural approach suggested by Ackerberg, Caves & Frazer (2006), ii) alongside more traditional system-GMM methods (Blundell & Bond, 1998) where lagged values of labour inputs are used as instruments. Our results indicate a negative impact of larger shares of older workers on productivity that is not compensated by lower labour costs, resulting in a lower productivity-labour costs gap. An increment of 10%-points of their share causes a 1.3-2.8% contraction of this gap. We conduct several robustness checks that largely confirm this result. This is not good news for older individuals’ employability and calls for interventions in the Belgian private economy aimed at combating the decline of productivity with age and/or better adapting labour costs to age-productivity profiles.

Keywords: Ageing; Old Labour Productivity and Employability; Panel Data Analysis (search for similar items in EconPapers)
JEL-codes: C33 D24 J24 (search for similar items in EconPapers)
Pages: 49
Date: 2012-06-04
New Economics Papers: this item is included in nep-age, nep-dem, nep-eff, nep-eur, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Ageing and employability. Evidence from Belgian firm-level data (2013)
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