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Are Older Workers Worthy of Their Pay? An Empirical Investigation of Age-Productivity and Age-Wage Nexuses

Ana Rute Cardoso, Paulo Guimaraes and Jose Varejao ()

No 5121, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using longitudinal employer-employee data spanning over a 22-year period, we compare age-wage and age-productivity profiles and find that productivity increases until the age range of 50-54, whereas wages peak around the age 40-44. At younger ages, wages increase in line with productivity gains but as prime-age approaches, wage increases lag behind productivity gains. As a result, older workers are, in fact, worthy of their pay, in the sense that their contribution to firm-level productivity exceeds their contribution to the wage bill. On the methodological side, we note that failure to account for the endogenous nature of the regressors in the estimation of the wage and productivity equations biases the results towards a pattern consistent with underpayment followed by overpayment type of policies.

Keywords: aging; productivity; wages (search for similar items in EconPapers)
JEL-codes: J14 J24 J31 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010-08
New Economics Papers: this item is included in nep-age, nep-eff, nep-lab and nep-neu
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Published - published in: De Economist, 2011, 159 (2), 95-111

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