Journal of Productivity Analysis

, Volume 46, Issue 1, pp 43–62 | Cite as

How does the age structure of worker flows affect firm performance?

  • Pekka Ilmakunnas
  • Mika Maliranta


We develop a method for decomposing firm performance to impacts coming from the inflows and outflows of workers and apply it to study whether older workers are costly to firms. Our estimation equations are derived from a variant of the decomposition methods frequently used for measuring micro-level sources of industry productivity growth. By using comprehensive linked employer–employee data, we study the productivity and wage effects, and hence the profitability effects, of the hiring and separation of younger and older workers. The evidence shows that the separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. To account for the correlation of the worker flows and productivity shocks we first estimate the shocks from a production function using materials as a proxy variable. In the second step the estimated shock is used as a control variable in our productivity, wage, and profitability equations.


Aging Productivity Wage Profits Hiring Separation Employer–employee data 

JEL Classification

J23 J24 J63 M51 



We are thankful to many individuals at Statistics Finland, and especially to Satu Nurmi and Elias Einiö for their guidance regarding the properties of the data. The data set is publicly available for research purposes, subject to terms and conditions of confidentiality, at the Research Services unit of Statistics Finland; contact, for access to these data. We have benefited from the comments of Roope Uusitalo and seminar participants at the VATT Institute for Economic Research (Helsinki), Nordic Summer Institute in Labor Economics in Uppsala, EEA Congress in Vienna, CAED Conference in Chicago, Annual Meeting of the Finnish Society for Economic Research in Helsinki, World Aging and Generations Congress in StGallen, and Workshop on Labor Turnover and Firm Performance, Helsinki. We thank the referees and associate editor for useful comments. Financial support from the Yrjö Jahnsson Foundation is gratefully acknowledged. The SAS and Stata codes used in this study are available from the authors upon request.


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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Aalto University School of BusinessAalto, HelsinkiFinland
  2. 2.The Research Institute of the Finnish Economy (ETLA)HelsinkiFinland
  3. 3.University of JyväskyläJyväskyläFinland

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