Does the Growth Process Discriminate Against Older Workers?

38 Pages Posted: 1 Dec 2008

See all articles by François Langot

François Langot

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP); Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS); IZA Institute of Labor Economics

Eva Moreno-Galbis

Université du Maine

Abstract

This paper seeks to gain insights on the relationship between growth and unemployment, when considering heterogeneous agents in terms of age. We introduce life cycle features in the endogenous job destruction framework à la Mortensen and Pissarides (1998). We show that, under the assumption of homogeneous productivity among workers, firms tend to fire older workers more often than young ones, when deciding whether to update or not a technology: there is an equilibrium where the creative destruction effect dominates over the capitalization effect for old workers, whereas the capitalization effect dominates for young workers. This discrimination against older workers can be moderated when we introduce heterogeneity (in terms of productivity) among workers. We also provide empirical support for these theoretical findings using OECD panel data and numerical simulations of the model.

Keywords: TFP growth, unemployment by age, old workers' employment rate, capitalization, creative destruction effect

JEL Classification: J14, J24, J26, O33

Suggested Citation

Langot, Francois and Moreno-Galbis, Eva, Does the Growth Process Discriminate Against Older Workers?. IZA Discussion Paper No. 3841. Available at SSRN: https://ssrn.com/abstract=1309083 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Francois Langot (Contact Author)

University of Angers - Centre d'Etudes Prospectives d'Economie Mathematique Appliquees a la Planification (CEPREMAP) ( email )

Ecole Normale Superieure
48 boulevard Jourdan
75014 Paris
France

Université du Maine - Groupe d' Analyse des Itineraires et Niveaux Salariaux (GAINS) ( email )

72085 Le Mans Cedex 9
France

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Eva Moreno-Galbis

Université du Maine ( email )

72085 Le Mans Cedex 9
France

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