Will You Still Need Me: When I’m 64?

For various reasons the relationship between age and productivity is a matter of policy concern. I present new empirical research showing how productivity is affected by age. I study age effects at the individual level by analyzing data on running and publishing in economic journals. Furthermore I present empirical evidence at the firm level on the relationship between age, wage and productivity. In particular I address the potential wage-productivity gap that might occur at higher ages. I conclude that the productivity of older workers indeed decreases with their age. Nevertheless, the decline is limited. Furthermore, I find no evidence of a pay-productivity gap at higher ages.     

On-the-job training and productivity: Firm-level evidence from a large developing country

We investigate the effects of on-the-job training on firm productivity and wages using a large panel data set constituted of all large and medium size manufacturing firms in China over 2003–2007. We estimate firm productivity carefully with a recent semiparametric method and combine the propensity score matching and the difference-in-differences techniques to estimate the treatment effect of training. We find consistent evidence that i) training helps boost firm productivity and wages; ii) the higher the training expenditure per capita, the higher the increase in productivity and wages; iii) firms benefit more from training than workers. These findings are not sensitive to industrial capital intensity or firm ownership structure.     

Wages,Productivity and Aging

In this article, we estimate age-based wage and productivity differentials using Canadian linked employer-employee data from the Workplace and Employee Survey 1999–2005. We use data at the workplace level to estimate production functions, taking into account the age profile of its workforce. Data on workers is used to estimate wage equations that also depend on age. Results show concave age-wage and age-productivity profiles. On average, we find that wages do not deviate significantly from productivity. For certain sub-groups, our results suggest some discrepancies between wages and productivity. This is the case for older workers with at least an undergraduate degree for whom productivity appears to be lower than their wages, while the reverse seems true for younger men. However, even in those cases, productivity differentials are too imprecise to draw any firm conclusions.     

Diversity at the Workplace: Whom Does it Benefit?

We examine whether firms and their employees benefit from age and educational diversity. At the plant level we explain productivity with workforce characteristics. Age diversity is positively and educational diversity negatively related to total factor productivity. These conclusions are robust to using alternative estimators (fixed effects, GMM, and Olley-Pakes approach). Individual gains are evaluated by estimating earnings equations with job match fixed effects. The explanatory variables include individual demographic variables, plant-level workforce characteristics and variables that describe the individuals’ relative position in the age, education, and gender structure of the plant. Plant-level diversity does not have a significant effect on individual wages. However, being different from others in terms of age, i.e. relational demography, is positively related to wage.     

Can older workers stay productive? The role of ICT skills and training

This paper quantitatively examines the effects of aging on labor productivity using individual worker data in Korea. We find that information and communications technology (ICT) skills and participation in job-related training can help older workers stay productive. The estimation results present that ICT skills, a measure incorporating an individual’s proficiency in ICT skills and their utilization in the workplace, has a positive effect on the wages of the older workers aged 50–64 with a high level of education or in a skill-intensive occupation. Job training also has a significant positive effect on the wages of older workers. These results imply that compared to younger workers, well-educated older workers can obtain greater productivity increase through ICT skill attainment and their adequate use, and job-training. The evidence suggests that a productivity decrease in line with the aging process can be mitigated by training aging workers to equip themselves with ICT skills.     

Foreign direct investment and factor prices in U.S. manufacturing

Foreign Direct Investment and Factor Prices in U.S. Manufacturing. —We investigate whether inward foreign direct investment (FDI) can explain part of the increase in relative wages of skilled workers in U.S. manufacturing over the period 1977–1994 by studying the sector bias of the effects of FDI on sector prices and technology. We follow the two-stage mandated-wage approach based on the StolperSamuelson theorem. We find that inward FDI affects the sum of sector prices and productivity depending on the absorptive capacity available in the sector. We also find some evidence that inward FDI has induced a sector bias towards using skilled workers over the period 1977–1994.     

Changes in managerial pay structures 1986-1992 and rising returns to skill

We examine the relationship between wages and skill requirementsin a sample of over 50,000 managers in 39 companies between1986 and 1992. The data include an unusually good measure ofjob requirements and skills that can proxy for human capital.We find that wage inequality increased both within and betweenfirms from 1986 and 1992. Higher returns to our measure of skillaccounts for most of the increasing inequality within firms.At the same time, our measure of skill does not explain muchof the cross-sectional variance in average wages between employers,and changes in returns to skill do not explain any of the timeseries increase in between-firm variance over time.     

Wage growth and inequality in urban China: 1988–2013

We investigate the evolution of wage levels, wage inequality, and wage determinants among urban residents in China using China Household Income Project data from 1988, 1995, 2002, 2007, and 2013.Average wage grew impressively between each pair of years. Wage inequality had long been on the increase, but between 2007 and 2013 no clear changes occurred. In 1988, age and wages were positively related throughout working life, but more recently older workers' wages have been lower than those of middle-aged workers. The relationship between education and wages was weak in 1988 but strengthened rapidly thereafter—a process that came to a halt in 2007.During the period in which China was a planned economy the gender wage gap was small in urban China, but it widened rapidly between 1995 and 2007. We also report the existence of a premium for being employed in a foreign-owned firm or in the state sector.     

Macroeconomic and Sectoral Effects of International Trade: A Vector Error-Correction Study

This study examines various claims that in the U.S., international trade has contributed to a loss of manufacturing base, an increased gap between unskilled and skilled wages, lower employment, and a loss of productivity. Cointegration tests indicate that in the long run and at the macro level, the ratio of trade to output and FDI to output are correlated with the manufacturing share of output, the ratio of unskilled to skilled wages, labor productivity, and the employment rate. However, Granger causality tests reveal that, with one exception, causation does not run from trade to the domestic variables, the only exception being that FDI Granger causes productivity. When the focus is shifted to the manufacturing sector, the results support the proposition that openness to trade has had adverse effects on this sector.A slightly different version of this paper was presented at the Fifty-sixth International Atlantic Economic Conference, October 16–19, 2003 in Quebec City, Canada. The research reported in this paper is partially funded by a grant from the Institute for Global Economic Affairs at Marquette University.     

Legal Minimum Wages and Employment Duration

We estimate the effect of minimum wages on employment duration using event history data from the 1988-1994 rounds of the National Longitudinal Survey of Youth. Existing literature takes two alternative tracks: Some studies predict reduced turnover due to rents created by minimum wages, others focus on the expected increase in turnover due to reduced job amenities and imperfect information. We find that for men, the net effect of a minimum wage depends on its magnitude relative to the typical wage in the local labor market. We find some evidence that where the minimum wage is low, separation rates for men hired at the minimum wage are reduced. We also find that as the relative value of the minimum wage rises, separation hazards increase. We interpret these findings as evidence that rents may accrue to minimum wage workers, but that the job matching process is undermined when the minimum wage binds.     

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

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?C54, whereas wages peak around the age 40?C44. 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.     

Health and Productivity: Panel Data Evidence from Ethiopia

Abstract: Neoclassical growth models and endogenous growth theories show the positive contribution of human capital to growth. Using household panel data (1994–2000) on individuals who reported their wages in urban Ethiopia, we estimated a relationship between health measures (i.e. proxied by height and BMI) and wages (which proxies productivity/growth). Our findings from the IV quantile regression estimates indicate that productivity is positively and significantly affected by education, height and BMI. The return to BMI is important both at the lower and upper end of the wage distribution. The return to height is significant only at the end of the wage distribution. The substantive content of the results (i.e. the high‐nutrition and high‐productivity equilibrium story) does not change even if we did not control for endogeneity of schooling. Non‐parametric evidence also supports the strong and positive relationship between productivity and our indicators of human capital.     

The Role of the Efficiency Gap for Spillovers from FDI: Evidence from the UK Electronics and Engineering Sectors

This paper focuses on the role of the efficiency gap in determining whether or not domestic firms benefit from productivity spillovers from FDI. We use establishment level data for the period 1980–1992 for the UK. Given that there is substantial heterogeneity of productivity across sectors we focus on two manufacturing sectors in detail, namely, electronics and engineering. We allow for different effects of FDI on establishments located at different quantiles of the productivity distribution by using conditional quantile regression. Overall, while there is some heterogeneity in results across sectors and quantiles, our findings clearly suggest that the efficiency gap matters for productivity spillover benefits. We find evidence for a u-shaped relationship between productivity growth and FDI interacted with the efficiency gap. We also analyse in some detail the impact of changes in relative efficiency on establishments’ ability to benefit from spillovers.     

The Linkage between Prices,Wages, and Labor Productivity: A Panel Study of Manufacturing Industries

This article investigates the long-run relationship between prices and wage-adjusted productivity as well as between real wages and average labor productivity at the industry level for a panel of 459 U.S. manufacturing industries over the period 1956-1996. Panel reintegration test results strongly reject the null of no reintegration in the panel between both prices and wage-adjusted productivity and between labor productivity and real wages for many (but not all) industries. Granger-causality tests show that prices are weakly exogenous and cause movements in unit labor cost. Bidirectional Granger causality is found between real wages and productivity; however, a one-to-one relationship is strongly rejected between real wages and productivity. Increases in labor productivity are associated with a less than unity increase in real wages.     

Inflation in South Africa: An Assessment of Alternative Inflation Models

We consider the relative empirical performance of a range of inflation models for South Africa. Model coverage is of Phillips curve, New Keynesian Phillips curve, monetarist and structural models of inflation. Our core findings are that the single most robust covariate of inflation is unit labour cost. We further decompose unit labour cost into changes in the nominal wage and real labour productivity. The principal association is a strong positive relationship between inflation and nominal wages, while improvements in real labour productivity report only a relatively weak negative association with inflation. Supply‐side shocks also consistently report an association with inflation. As to demand‐side shocks, the output gap does not return a robust statistical association with inflation. Instead, it is growth in the money supply and government expenditure which return robust and theoretically consistent associations with inflationary pressure.     

Aging,automation, and productivity in Korea

This paper examines the impact of aging in the Republic of Korea on productivity as measured by labor productivity or total factor productivity (TFP). It also assesses the effect of robot adoption on the relation between aging and productivity using industrial level data. We find that aging is negatively associated with labor productivity and TFP growth. This is true particularly when aging is measured by increases in shares of old workers. If aging is measured by increases in the median age of workers, the negative effect is weaker. Evidence also suggests that robot technology mitigates aging's negative effect on productivity growth, particularly when productivity is measured by TFP. However, there is no evidence that robots are more heavily adopted in aged industries. While robot technology does not directly contribute to higher productivity growth, our findings suggest that the robot adoption can alleviate the negative impact of aging by helping workers in their 50s and 60s contribute less adversly to productivity growth.     

Market wage or discrimination? The remuneration of male and female wool spinners in the seventeenth‐century Dutch Republic1

In the historical debate, the gender wage gap is usually attributed either to productivity differences or to gender discrimination. By analysing a newly constructed series of spinning wages in the seventeenth‐century Dutch Republic, the wages of male and female textile workers for the same work could be investigated. At first sight, the evidence on equal piece rates for spinning men and women seems to rule out wage discrimination. Nevertheless, more deeply rooted gender discrimination resulting from the segmented seventeenth‐century labour market restricted women's access to many professions. Exactly this segmentation determined differences in wage earning capacities between men and women.     

The Impact of Cannabis Use on Health

Summary Chronic daily cannabis use has been shown to have long term harmful health effects, which in turn is expected to reduce labour market productivity. The evidence is less clear on the health impact of less frequent consumption, which is the more typical mode of use, and previous empirical studies fail to find robust evidence of an adverse impact of these modes of use on labour market productivity. This paper attempts to shed some light on this issue by directly estimating the impact of cannabis consumption in the past week and past year on health status using information on prime age individuals living in Australia. We find that cannabis use does reduce self-assessed health status, with the effect of weekly use being of a similar magnitude as smoking cigarettes daily. Moreover, we find evidence of a dose-response relationship in the health impact of cannabis use, with annual use having roughly half the impact of weekly use.Helpful comments on an earlier draft were received from Jan van Ours, Rosalie Pacula, two anonymous referees and participants at the 81st Annual Conference of the Western Economic Association International.     

The Impact of Special Economic Zones and Government Intervention on Firm Productivity: The Case of Batam,Indonesia

Various studies have explored the effects of industrial agglomeration and special economic zones (SEZs) in Asia, but there has been a lack of data-driven analysis of SEZ performance. This paper provides a case study on Batam, which has been developed as an SEZ through government-to-government (G2G) cooperation, offering lessons for other developing countries. The study examines the effects of industrial zones, foreign investment and government intervention on firm productivity, using an ex-post evaluation method and econometric models. The paper does not find conclusive evidence that Batam’s status as an SEZ affects firm productivity and growth. Although firm agglomeration proves beneficial for firm productivity, it is not clear that SEZ policy has driven this productivity. The paper argues that government policies should stimulate innovation and inter-firm cooperation to increase knowledge spillovers and technology transfer instead of focusing on attracting investment.     

Was Malthus right? The relationship between population and real wages in Italian history, 1320 to 1870

In this article we investigate the relation between population and real wages in the Italian economy during the period 1320–1870. The main result is that the positive check is strong and statistically significant but the other equilibrating mechanism in the Malthusian model – the preventive check – based on the positive relationship between fertility and real wages does not operate in pre-industrial Italy. In contrast to the Malthusian hypothesis, we find a negative feedback from wage to population. The empirical result is clearly consistent with the theoretical framework of the “old age security motive”. We show, with a simple overlapping-generation model, that by allowing for substitution in a pre-industrial economy between child quantity and other assets (such as new seeds, better soybean quality, and new cultivation and irrigation methods) fertility may be negatively affected whenever income rises.