Old Workers, New Capital

Philippe d'Astous, Thomas Geelen and Jakub Hajda

Cahiers de recherche / Working Papers from Institut sur la retraite et l'épargne / Retirement and Savings Institute

Abstract: How does workforce aging affect corporate investment? We investigate this question using comprehensive matched employer-employee data. Exploiting variation in the age of newly hired workers, we find that firms hiring older workers significantly boost capital investment. Specifically, a typical increase in the average age of new hires raises investment rates by 0.3 percentage points—a 2.6% increase relative to the sample mean. To establish causality, we implement a shift-share instrumental variable approach that leverages industry-level demographic trends interacted with firms’ initial workforce composition. Our results are consistent with a model where firms optimally choose between hiring younger and older workers who differ in productivity and wages.

Keywords: corporate investment; workforce aging; labor heterogeneity (search for similar items in EconPapers)
JEL-codes: G30 G31 J1 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:rsi:irersi:20

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