Aging, Labor Turnover and Firm Performance

ETLA Discussion Paper No. 1092

44 Pages Posted: 7 May 2007

See all articles by Pekka Ilmakunnas

Pekka Ilmakunnas

Aalto University School of Business

Mika Maliranta

ETLA, The Research Institute of the Finnish Economy

Date Written: May 2, 2007

Abstract

We 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 from the Finnish business sector, we study the productivity and wage effects, and hence the profitability effects, of hiring and separation of younger and older workers. The evidence shows that separations of older workers are profitable to firms, especially in the manufacturing ICT-industries. Robustness checks include the use of regional labor supply and other variables as instruments for the potential endogeneity of the labor flows.

Keywords: aging, productivity, wage, profits, hiring, separation, employer-employee data

JEL Classification: C43, J23, J24, J63, M51

Suggested Citation

Ilmakunnas, Pekka and Maliranta, Mika, Aging, Labor Turnover and Firm Performance (May 2, 2007). ETLA Discussion Paper No. 1092, Available at SSRN: https://ssrn.com/abstract=984683 or http://dx.doi.org/10.2139/ssrn.984683

Pekka Ilmakunnas

Aalto University School of Business ( email )

PO Box 21240
FI-00076 Aalto, Helsinki
Finland
+358 40 5815390 (Phone)

Mika Maliranta (Contact Author)

ETLA, The Research Institute of the Finnish Economy ( email )

Lonnrotink. 4 B
FIN-00120 Helsinki, 00120
Finland
+358 9 609900 (Phone)
+358 9 601753 (Fax)

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