Twisting the Demand Curve: Digitalization and the Older Workforce

41 Pages Posted: 16 Nov 2020 Last revised: 7 Apr 2021

See all articles by Erling Barth

Erling Barth

Institute for Social Research, Norway; Department of Economics, University of Oslo; IZA Institute of Labor Economics

James C. Davis

US Census Bureau

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Kristina McElheran

University of Toronto - Strategic Management

Date Written: November 2020

Abstract

This paper uses U.S. Census Bureau panel data that link firm software investment to worker earnings. We regress the log of earnings of workers by age group on the software investment by their employing firm. To unpack the potential causal factors for differential software effects by age group we extend the AKM framework by including job-spell fixed effects that allow for a correlation between the worker-firm match and age and by including time-varying firm effects that allow for a correlation between wage-enhancing productivity shocks and software investments. Within job-spell, software capital raises earnings at a rate that declines post age 50 to about zero after age 65. By contrast, the effects of non-IT equipment investment on earnings increase for workers post age 50. The difference between the software and non-IT equipment effects suggests that our results are attributable to the technology rather than to age-related bargaining power. Our data further show that software capital increases the earnings of high-wage workers relative to low-wage workers and the earnings in high-wage firms relative to low-wage firms, and may thus widen earnings inequality within and across firms.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Barth, Erling and Davis, James C. and Freeman, Richard B. and McElheran, Kristina Steffenson, Twisting the Demand Curve: Digitalization and the Older Workforce (November 2020). NBER Working Paper No. w28094, Available at SSRN: https://ssrn.com/abstract=3731263

Erling Barth (Contact Author)

Institute for Social Research, Norway ( email )

Munthesgate 31
0260 Oslo
Norway

Department of Economics, University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

IZA Institute of Labor Economics

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

James C. Davis

US Census Bureau ( email )

National Bureau of Economic Research
1050 Massachusetts Ave.
Cambridge, MA 02138
United States

Richard B. Freeman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)

University of Edinburgh - School of Social and Political Studies ( email )

Adam Ferguson Building
George Square
Edinburgh EH8 9LL
United Kingdom

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States
617-868-3900 (Phone)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
37
PlumX Metrics