Population Aging, Firms, and Worker Composition

Santiago Caicedo, Cheng Chen, Aspen Gorry and Takahiro Hattori
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Santiago Caicedo: Northeastern University
Cheng Chen: Clemson University
Aspen Gorry: Clemson University
Takahiro Hattori: The University of Tokyo

No CARF-F-633, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: Population aging changes the composition of workers in the labor force. We develop a framework to understand how worker composition affects productivity in an economy with heterogeneous establishments and apply it to Japan. Reallocating workers to the optimal composition of experience and skill increases output by 8.5%. Strong complementarity between workers’ skill and establishment productivity implies differential hiring strategies across establishments and heterogeneous effects of population aging on wages and market concentration. We find evidence consistent with these predictions using Japanese data. Despite large potential gains from reallocation, we find that further aging in Japan has only modest impacts on worker productivity.

Pages: 69 pages
Date: 2026-10
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf633

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