Regional population structure and young workers’ wages

Alfred Garloff (garloff2@iab.de) and Duncan Roth
Additional contact information
Alfred Garloff: institute for Employment Research (IAB)

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper estimates the effect that changes in the size of the youth population have on the wages of young workers. Assuming that differently aged workers are only imperfectly substitutable, economic theory predicts that individuals in larger age groups earn lower wages. We test this hypothesis for a sample of young, male, full-time employees in Western Germany during the period 1999-2010. In contrast to other studies, functional rather than administrative spatial entities are used as they provide a more accurate measure of the youth population in an actual labour market. Based on instrumental variables estimation, we show that an increase in the youth share by one percentage point is predicted to decrease a young worker’s wages by 3%. Our results also suggest that a substantial part of this effect is due to members of larger age groups being more likely to be employed in lower-paying occupations.

Keywords: Population structure; wages; youth share; labour-market regions; instrumental variables; occupational selection (search for similar items in EconPapers)
JEL-codes: J21 J31 R23 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2017
New Economics Papers: this item is included in nep-eur, nep-lma and nep-ure
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Chapter: Regional Population Structure and Young Workers’ Wages (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201706

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