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Estimating a Firm's Age-Productivity Profile Using the Present Value of Workers' Earnings

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  • Laurence J. Kotlikoff
  • Jagadeesh Gokhale

Abstract

In hiring new workers, risk-neutral employers equate the present expected value of a worker's compensation to the present expected value of his/her productivity. Data detailing how present expected compensation varies with the age of hire, therefore, embed information about how productivity varies with age. This paper infers age-productivity profiles using data on the present expected value of earnings of new hires of a Fortune 1000 firm. For each of the five occupation/sex groups considered, productivity falls with age, with productivity exceeding earnings when young and vice versa when old.

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  • Laurence J. Kotlikoff & Jagadeesh Gokhale, 1992. "Estimating a Firm's Age-Productivity Profile Using the Present Value of Workers' Earnings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(4), pages 1215-1242.
    • Handle: RePEc:oup:qjecon:v:107:y:1992:i:4:p:1215-1242.
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    Cited by:

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    2. Philippe Lemistre & Jean-Michel Plassard, 2002. "Stratégies de mobilité et rendements de l'ancienneté en France," Économie et Prévision, Programme National Persée, vol. 155(4), pages 45-60.
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    6. Dohmen, Thomas J., 2004. "Performance, seniority, and wages: formal salary systems and individual earnings profiles," Labour Economics, Elsevier, vol. 11(6), pages 741-763, December.
    7. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
    8. Mask, Joshua, 2023. "Salary history bans and healing scars from past recessions," Labour Economics, Elsevier, vol. 84(C).
    9. Neumark, David & Song, Joanne, 2013. "Do stronger age discrimination laws make Social Security reforms more effective?," Journal of Public Economics, Elsevier, vol. 108(C), pages 1-16.
    10. Heutel, Garth, 2009. "Testing implications of a tournament model of school district salary schedules," Economics of Education Review, Elsevier, vol. 28(1), pages 143-151, February.
    11. Hudson, John & Sessions, John G., 2011. "Parental education, labor market experience and earnings: New wine in an old bottle?," Economics Letters, Elsevier, vol. 113(2), pages 112-115.
    12. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    13. Schneider, Lutz, 2006. "Sind ältere Beschäftigte weniger produktiv? Eine empirische Analyse anhand des LIAB," IWH Discussion Papers 13/2006, Halle Institute for Economic Research (IWH).
    14. Saint-Paul, Gilles, 2009. "Does the welfare state make older workers unemployable?," CEPR Discussion Papers 7490, C.E.P.R. Discussion Papers.
    15. Adams, Scott, 2007. "Health insurance market reform and employee compensation: The case of pure community rating in New York," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1119-1133, June.
    16. de la Croix, David & Pierrard, Olivier & Sneessens, Henri R., 2013. "Aging and pensions in general equilibrium: Labor market imperfections matter," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 104-124.
    17. van Dalen, Hendrik P., 1996. "Pitfalls in the economic analysis of aging," Journal of Policy Modeling, Elsevier, vol. 18(2), pages 157-184, April.
    18. University of Pennsylvania & Ludo Visschers, 2007. "Employment Uncertain and Wage Contracts," 2007 Meeting Papers 547, Society for Economic Dynamics.
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    21. Shioji, Etsuro, 2001. "Composition Effect of Migration and Regional Growth in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 15(1), pages 29-49, March.

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