Endogenous age discrimination
This paper shows that hiring discrimination against old workers occurs in imperfect labour markets even if individual productivity does not decrease with age and in the absence of a taste for discrimination. Search and informational frictions generate unemployment, with less productive workers facing higher risks of unemployment. Therefore, the employment status provides a signal for expected productivity. This stigma of unemployment becomes stronger with individual age and reduces the hiring opportunities of older workers. Political measures such as a reduction in dismissal protection can help to restore efficiency.
KeywordsSearch frictions Age discrimination Unemployment
JEL ClassificationJ14 J41 J71
I am grateful to Leo Kaas, Carlos Alós–Ferrer, Friedrich Breyer, Stefan Zink and two anonymous referees for the numerous helpful comments and remarks.
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