Does the Growth Process Discriminate against Older Workers?

Francois Langot and Eva Moreno-Galbis (eva.morenogalbis@univ-angers.fr)
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Eva Moreno-Galbis: Université d'Angers
Authors registered in the RePEc Author Service: Eva Moreno Galbis

No 3841, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper seeks to gain insights on the relationship between growth and unemployment, when considering heterogeneous agents in terms of age. We introduce life cycle features in the endogenous job destruction framework à la Mortensen and Pissarides (1998). We show that, under the assumption of homogeneous productivity among workers, firms tend to fire older workers more often 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 young workers. This discrimination against older workers can be moderated when we introduce heterogeneity (in terms of productivity) among workers. We also provide empirical support for these theoretical findings using OECD panel data and numerical simulations of the model.

Keywords: old workers' employment rate; unemployment by age; TFP growth; capitalization; creative destruction effect (search for similar items in EconPapers)
JEL-codes: J14 J24 J26 O33 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-11
New Economics Papers: this item is included in nep-age, nep-bec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published - published in: Journal of Macroeconomics, 2013, 38, 286-306

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Journal Article: Does the growth process discriminate against older workers? (2013)
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