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The Relationship Between Firm Productivity, Wage Level and Employees’ Age: A Sectoral Perspective

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  • Pål Børing

    (NIFU Nordic Institute for Studies in Innovation, Research and Education)

Abstract

We examine how a firm’s productivity level, wage level and productivity–wage gap are related to the age composition of its employees. Panel data of Norwegian firms in the following three sectors are used: the manufacturing sector, the WRT (wholesale and retail trade, repair of motor vehicles and motorcycles) sector, and the PST (professional, scientific and technical activities) sector. Three hypotheses are formulated: a firm’s productivity level is negatively affected by its proportion of the oldest workers (H1), a firm’s wage level is negatively affected by its proportion of the youngest workers, and positively affected by its proportion of the oldest workers (H2), and a firm’s productivity–wage gap is positively affected by its proportion of the youngest workers, and negatively affected by its proportion of the oldest workers (H3). Based on GMM regression in first differences, the estimation results give some support for (a) the hypothesis H1 for the WRT sector, but no support for the manufacturing and PST sectors, (b) H2 for the manufacturing and PST sectors, but little support for the WRT sector, and (c) H3 for the PST sector, but no support for the manufacturing and WRT sectors. The GMM results show that a firm’s productivity–wage gap is positively affected by the proportion of the youngest age group in the PST sector, while there is a non-significant effect in the manufacturing and WRT sectors. The proportion of the oldest age group has a non-significant effect on this gap in each of the three sectors. The results indicate that there is no clear evidence of an age-related productivity–wage gap.

Suggested Citation

  • Pål Børing, 2021. "The Relationship Between Firm Productivity, Wage Level and Employees’ Age: A Sectoral Perspective," De Economist, Springer, vol. 169(3), pages 367-404, August.
    • Handle: RePEc:kap:decono:v:169:y:2021:i:3:d:10.1007_s10645-021-09390-5
    DOI: 10.1007/s10645-021-09390-5
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    More about this item

    Keywords

    Productivity level; Wage level; Productivity–wage gap; Age groups; Matched employer–employee data; Financial data;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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