De Economist

, 159:95 | Cite as

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

  • Ana Rute Cardoso
  • Paulo Guimarães
  • José Varejão
Article

Abstract

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 50–54, whereas wages peak around the age 40–44. 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.

Keywords

Aging Productivity Wages 

JEL Classification

J14 J24 J31 

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Copyright information

© Springer Science+Business Media, LLC. 2011

Authors and Affiliations

  • Ana Rute Cardoso
    • 1
  • Paulo Guimarães
    • 2
    • 3
  • José Varejão
    • 2
    • 4
  1. 1.Institute for Economic Analysis (CSIC) and Barcelona GSE. IAE-CSICBellaterra, BarcelonaSpain
  2. 2.Universidade do PortoPortoPortugal
  3. 3.University of South CarolinaColumbiaUSA
  4. 4.CEF.UPPortoPortugal

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