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on Labor Markets - Supply, Demand, and Wages |
| By: | Maida, Agata (University of Milan); Weber, Andrea (Central European University) |
| Abstract: | Over the last decade, several countries have followed the Norwegian example and introduced laws mandating gender quota for corporate board membership. The main aim of these laws is breaking the "glass ceiling" which prevents women from advancing into top corporate positions. In this paper, we evaluate the Italian law of 2011, which installed a step-wise increase in gender quota that remain effective for three consecutive board renewals of listed limited liability firms. We link firm-level information on board membership and board election dates with detailed employment and earnings records from the Social Security registers. Exploiting the staggered introduction of the gender quota regulation and variation in board renewals across firms, we evaluate the effect of the board gender composition on measures of gender diversity in top positions over a period of 4 years. While the reform substantially raised the female membership on corporate boards, we find no evidence of spillover effects on the representation of women in top executive or top earnings positions. Our results confirm the findings by Bertrand et al. (2019) who study the introduction of a gender quota for board members in Norway. Given that Italy is a much less egalitarian society than Norway, with a larger scope of establishing gender equality, our results confirm that board quota policies alone are ineffective in raising female representation in top corporate positions, at least in the short run. |
| Keywords: | gender quota, corporate board reform, glass ceiling, female employment |
| JEL: | J24 J7 J78 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12099&r=all |
| By: | Sotiris Blanas (National Bank of Belgium) |
| Abstract: | This paper is the first to study the distinct effects of Information Technologies (IT) and Communication Technologies (CT) on the skill, age, and age-skill composition of labour demand. The analysis is conducted on a sample comprising 10 developed countries, 30 industries covering the largest part of the economy, and the period 1982-2005. I find that IT intensity increases the relative demands for the high-skilled, low-skilled and oldest workers, while it decreases the relative demands for the medium-skilled and younger workers. Also, IT intensity increases the relative demands for the high-skilled and low-skilled of all age profiles, while it decreases the relative demands for the medium-skilled of all age profiles. CT intensity exerts opposite effects. Consistent with knowledge-based hierarchy theories highlighting the organisational aspect of the adoption of IT and CT by firms, the empowerment of agents at lower and higher levels of the hierarchy induced by IT and CT, respectively, rationalise these findings. I also find that the aforementioned effects operate mostly as of 1990, when the advancement rates of IT and CT were even higher than in the 1980s. Although a clear pattern of disproportionate effects across sectors is not identified, such a pattern across countries does exist: the inequalities generated by the two types of technologies are mitigated by higher union density. |
| Keywords: | Information Technologies; Communication Technologies; relative labour demand; ageskill profile |
| JEL: | O33 J21 J23 J24 J31 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201901-365&r=all |
| By: | Klenio Barbosa; Fernando V. Ferreira |
| Abstract: | We study the causes and consequences of patronage in Brazilian cities since the country’s re-democratization. We test key mechanisms – fiscal rules, accountability, political ideology, and rent-seeking – and estimate the consequences of patronage for public finances. Our data consist of the universe of public sector employees merged with their party affiliations, and a dynamic regression discontinuity design is applied to disentangle patronage from the growing political participation. The short-term patronage effect is large, with winning political coalitions increasing their shares of public sector workers and wages by 4 and 6 percentage points, respectively, during a mayoral term. Part of this effect lasts longer than a decade, with winning coalitions also occupying civil servant jobs that perform service-oriented tasks. This political occupation of government jobs is not associated with ideology, though. Instead, lack of accountability and rent-seeking are the primary driving forces, while reliance on intergovernmental transfers only increases patronage for smaller cities. Higher patronage does not affect the size of local governments, but it changes the composition of expenditures: hiring politically connected workers crowds out, almost one-to-one, non-affiliated employees. Overall, patronage accounted for more than half of the dramatic increase in public sector political employment since the Brazilian re-democratization. |
| JEL: | D72 D73 H70 J45 M5 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25501&r=all |
| By: | Andrén, Daniela (Örebro University School of Business); Mudenda, Lackson Daniel (Örebro University School of Business); Pettersson, Nicklas (Örebro University School of Business) |
| Abstract: | There is an increasing emphasizes on the importance of allowing people as they grow older to continue to work according to their work capacity and preferences. This paper builds on earlier literature that shows that firms employ older workers, but they tend not to hire them, and provides an explorative analysis of the establishments that employ older workers. A special focus is on how sensitive are the findings when the definition of older workers become more restrictive. Using employer-employee data from Swedish administrative registers, we found that the difference in establishments’ employment is large enough to explain some of the observed difference across definitions. The retirement age in the guaranteed pension scheme, i.e., 65 years, seems to be one the institutional settings that affect both the employees and employers’ decision for work after 65, but also the establishment’s size, age and ownership. |
| Keywords: | active aging; older workers; establishments; firms |
| JEL: | J21 J22 J23 J24 J26 |
| Date: | 2019–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2018_014&r=all |
| By: | Mary J. Lopez; Sita Slavov |
| Abstract: | As the share of older immigrants residing in the U.S. begins to rise, it is important to understand how immigrants’ retirement behavior and security compare to that of natives. This question has implications for the impact of immigration on government finances and for the retirement security of immigrants. We use data from the Health and Retirement Study (HRS) to examine how immigrants’ retirement and Social Security claiming patterns compare to those of natives. We find that immigrants are significantly less likely than natives to retire or claim Social Security in their early 60s. We do not find heterogeneous effects by ethnicity or age of arrival to the U.S. We also find no evidence that immigrants exit the survey at higher rates than U.S. natives in their late 50s through 60s, a finding that is consistent with immigrants retiring in the U.S. rather than abroad. |
| JEL: | D14 H55 J15 J26 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25518&r=all |
| By: | Michael White (University of Westminster); Alex Bryson (University College London, National Institute of Social and Economic Research and Institute for the Study of Labor) |
| Abstract: | Few studies investigate the links between high-performance work systems (HPWS) on public sector organizational performance and worker job attitudes. We fill this gap with analyses of these links using linked employer-employee surveys of workplaces in Britain in 2004 and 2011. We find robust evidence of positive associations between the use of HPWS and organizational performance in the public sector but no associations with worker attitudes. The implication is that, in contrast to similar work on the private sector in the United States (Appelbaum et al., 2000) HPWS is not delivering mutual gains for employers and employees in the British public sector. |
| Keywords: | HRM; HPWS; workplace performance; job satisfaction; organizational commitment; trust |
| JEL: | J28 L23 M50 M54 |
| Date: | 2018–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:qss:dqsswp:1810&r=all |
| By: | Andrea Garnero; Francois Rycx; Isabelle Terraz |
| Abstract: | How do firm-level collective agreements affect firm performance in a multi-level bargaining system? Using detailed Belgian linked employer-employee panel data, our findings show that firm agreements increase both wage costs and labour productivity (with respect to sector-level agreements). Relying on a recent approach developed by Bartolucci (2014), they also indicate that firm agreements exert a stronger impact on wages than on productivity, so that on average profitability is hampered. However, this rent-sharing effect only holds in sectors where firms are more concentrated. Firm agreements are thus mainly found to raise wages beyond labour productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm-level agreements benefit both employers and employees – through higher productivity and wages – without being detrimental to firms’ gross profits. |
| JEL: | C33 J24 J31 |
| Date: | 2019–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:223-en&r=all |
| By: | Safojan, Romina (Tilburg University, Center For Economic Research) |
| Abstract: | This paper explores the causal impact of exports on the share of informal labor in the Argentinean manufacturing sector. Using an instrumental variable approach to address potential endogeneity concerns, I show that an exogenous 10 percentage points increase in export intensity induces a reduction of the informality rate of 2.2 percentage points. Then, I explore the channel through which exports affect informality. By differentiating exports according to the income group of their destinations, I find that the aggregate effect of exports is explained by the sales to high-income countries. Moreover, the effect is partially explained by an increase in the complexity of the tasks performed in the jobs. Overall, the evidence suggests that under an increase in the demand of higher quality exports, the manufacturing firms increase their productivity by reducing their share of informal workers. |
| Keywords: | exports; labor informality; productivity; task complexity; Argentina |
| JEL: | F16 J24 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:de04345d-1e8f-4b40-afa2-0feb810ad5e0&r=all |
| By: | Xizi Li (University of Connecticut); Stephen L. Ross (University of Connecticut) |
| Abstract: | In this paper, we extend existing models that use the NLSY 79 to document employer screening and learning by showing that the return to education and ability change with experience. Specifically, we test for and document a non-linear relationship between wages and ability as measured by the AFQT score at low levels of potential experience. For high levels of AFQT, wages appear to fall as AFQT increases. As experience increases, the relationship between wages and AFQT returns to a monotonic relationship. As a result much of the observed increase in the return to AFQT as potential experience increases is associated with a change in the shape of the relationship, and the increase in the return to AFQT at lower levels of AFQT is more modest. These results are robust using samples and models from previous papers on the subject, developing a broader sample using all waves of the NLSY 79, and analyzing the question using data from the NLSY 97. Finally, we find evidence that high AFQT workers without four years of college select into occupations that provide more training, perhaps sacrificing initial wages in order to build skills. |
| Keywords: | Wages, Human Capital, Ability, Screening, Signaling, Learning, Statistical Discrimination, AFQT, Education, Compensating Differential, Training, Occupation, NLSY |
| JEL: | D82 D83 I24 J24 J31 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2019-01&r=all |
| By: | Manoj Mohanan; Katherine Donato; Grant Miller; Yulya Truskinovsky; Marcos Vera-Hernández |
| Abstract: | A central issue in designing performance incentive contracts is whether to reward the production of outputs versus use of inputs: the former rewards efficiency and innovation in production, while the latter imposes less risk on agents. Agents with varying levels of skill may perform better under different contracts as well – more skilled workers may be better able to innovate, for example. We study these issues empirically through an experiment enabling us to observe and verify outputs (health outcomes) and inputs (adherence to recommended medical treatment) in Indian maternity care. We find that both output and input incentive contracts achieved comparable reductions in post-partum hemorrhage rates, the dimension of maternity care most sensitive to provider behavior and the largest cause of maternal mortality. Interestingly, and in line with theory, providers with advanced qualifications performed better and used new strategies under output incentives, while under input incentives, providers with and without advanced qualifications performed equally. |
| JEL: | D86 J41 O15 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25499&r=all |
| By: | Helm, Ines (Dept. of Economics, Stockholm University) |
| Abstract: | Using a broad set of national industry trade shocks, I employ a novel approach to estimate agglomeration effects by exploiting within industry variation in indirect exposure to the other local industries’ (national) trade shocks across local labor markets. This variation stems from differences in local industry composition and allows to test for the existence of heterogeneous agglomeration effects across industries. I find considerable employment spillovers from other tradable industries’ trade shocks and even stronger effects within the same broad sector. Spillovers are larger for industries employing similar workers and are triggered predominantly by shocks to high technology industries. |
| Keywords: | Agglomeration; Local Labor Markets; Trade Shocks |
| JEL: | F16 J20 R11 R12 |
| Date: | 2019–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2019_0001&r=all |
| By: | Anders Jensen |
| Abstract: | This paper studies how the transition from self-employment to employee-jobs over the long run of development explains growth in income tax capacity. I construct a new database which covers 100 household surveys across countries at different income levels and 140 years of historical data within the US (1870-2010). Using these data, I first establish four new stylized facts: 1) within country, the share of employees increases over the income distribution, and increases at all levels of income as a country develops; 2) the income tax exemption threshold moves down the income distribution as a country develops, tracking employee growth; 3) the employee share above the tax exemption threshold is maximized and remains constantly high; 4) movements in the tax exemption threshold account for the observed variation in tax collection across development. These findings are consistent with a model where a high employee share is a necessary condition for effective taxation and where the rise in income covered by information trails through increases in employee shares drives expansion of the income tax base. To provide a causal estimate of the impact of employee share on the exemption threshold, I study a state-led US development program implemented in the 1950s-60s which shifted up the level of employee share. The identification strategy exploits within-state changes in court-litigation status which generates quasi-experimental variation in the effective implementation date of the program. I find that the exogenous increase in employee share is associated with an expansion of the state income tax base and an increase in state income tax revenue. |
| JEL: | D31 H11 H21 H24 H26 H71 O15 O22 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25502&r=all |
| By: | Richard B. Freeman; Wei Huang; Teng Li |
| Abstract: | Firms often use non-linear incentive systems to motivate workers to achieve specified goals, such as paying bonuses to reach targets in sales, production, or cost reduction. Using administrative data from a major Chinese insurance firm that raised its sales targets and rewards for insurance agents greatly in 2015, we find that increased incentives induced agents to increase sales of the increasingly incentivized life insurance products, bunched around the new targets, albeit in part with some low quality sales that led to canceled contracts, while reducing sales of products out-side the new incentive system. The greater non-linear incentives raised agent incomes and low-ered turnover and substantially increased firm revenues net of the increase in payments to agents. The stock market reacted to the new system with a jump in the firms’ share price relative to its main competitor by 15-20% in the days surrounding introduction of the new system. |
| JEL: | J00 J22 J3 M5 M52 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25507&r=all |
| By: | Peter Gal; Giuseppe Nicoletti; Theodore Renault; Stéphane Sorbe; Christina Timiliotis |
| Abstract: | This paper assesses how the adoption of a range of digital technologies affects firm productivity. It combines cross-country firm-level data on productivity and industry-level data on digital technology adoption in an empirical framework that accounts for firm heterogeneity. The results provide robust evidence that digital adoption in an industry is associated to productivity gains at the firm level. Effects are relatively stronger in manufacturing and routine-intensive activities. They also tend to be stronger for more productive firms and weaker in presence of skill shortages, which may relate to the complementarities between digital technologies and other forms of capital (e.g. skills, organisation, or intangibles). As a result, digital technologies may have contributed to the growing dispersion in productivity performance across firms. Hence, policies to support digital adoption should go hand in hand with creating the conditions to enable the catch-up of lagging firms, notably by easing access to skills. |
| Keywords: | cloud computing, digitalisation, high-speed internet, ICT, productivity, skills |
| JEL: | D24 J24 O33 |
| Date: | 2019–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1533-en&r=all |
| By: | Jongen, Egbert L. W. (CPB Netherlands Bureau for Economic Policy Analysis); Stoel, Maaike (Ministry of Economic Affairs and Climate Policy) |
| Abstract: | We study the elasticity of taxable labour income in the Netherlands. We use a large and rich data set, including both financial and demographic variables, for the period 1999–2005. The 2001 tax reform generates large exogenous variation in marginal tax rates at different segments of the income distribution. For all workers, we find an elasticity of 0.10 in the short run, 1 year after the reform, rising to 0.24 in the medium to longer run, 5 years after the reform. Furthermore, we find that the elasticity is higher for higher incomes and women. Also, we find that the elasticity of taxable labour income is higher than the elasticity of (contractual) annual hours worked. |
| Keywords: | elasticity of taxable income, hours worked, Netherlands |
| JEL: | H24 H31 J22 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12090&r=all |
| By: | Gutiérrez Rufrancos, Héctor Elías |
| Abstract: | Union density in Mexico has been in decline since the 1980s. This paper provides ev- idence on the worker compensation gains (losses) made by males upon joining (leaving) a union. These are estimated using a nationally representative labour market survey covering 2005q1-2016q1. The transitions between non-union and union status are investigated using a difference-in-difference estimator. The findings suggest that joining a union is associated with modest wage gains, contrary to what the literature has shown for most industrialised nations. However, in contrast to this some union leavers are found to experience a decrease in wages. This paper also contributes to the wider literature by providing the first estimates of the longitudinal gain (loss) associated with joining (leaving) a union with respect to non-wage benefits. The findings show joining (leaving) a union increases (decreases) the probability of being in receipt of legally guaranteed benefits such as bonuses and paid holidays. This sug- gests that although union density may be in decline, unions still have an important role to play in voicing worker's preferences with respect to compensation and ensuring that employers comply with the law. |
| Keywords: | unions,wages,Mexico,non-wage benefits |
| JEL: | J31 J33 J51 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:315&r=all |
| By: | Finn Kydland; Nick Pretnar |
| Abstract: | Throughout the 21st century, population aging in the United States will lead to increases in the number of elderly people requiring some form of living assistance which, as some argue, is to be seen as a burden on society, straining old-age insurance systems and requiring younger agents to devote an increasing fraction of their time toward caring for infirm elders. Given this concern, it is natural to ask how aggregate GDP growth is affected by such a phenomenon. We develop an overlapping generations model where young agents face idiosyncratic risk of contracting an old-age disease, like for example Alzheimer's or dementia, which adversely affects their ability to fully enjoy consumption. Young agents care about their infirm elders and can choose to supplement elder welfare by spending time taking care of them. Through this channel, aggregate GDP growth endogenously depends on young agents' degree of altruism. We calibrate the model and show that projected population aging will lead to future reductions in output of 17% by 2056 and 39% by 2096 relative to an economy with a constant population distribution. Curing diseases like Alzheimer's and dementia can lead to a compounded output increase of 5.4% while improving welfare for all agents. |
| JEL: | J14 J22 O40 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25498&r=all |
| By: | Brinca, Pedro; Duarte, João B.; Holter, Hans A.; Oliveira, João G. |
| Abstract: | Since 1980 the U.S. economy has experienced a large increase in income inequality. To explain this phenomenon we develop a life-cycle, overlapping generations model with uninsurable labor market risk, a detailed tax system and investment-specific technological change (ISTC). We calibrate our model to match key characteristics of the U.S. economy and study how ISTC, shifts in taxation, government debt and employment have contributed to the rise in income inequality. We find that these structural changes can account for close to one third of the observed increase in the post-tax income Gini. The main mechanisms in play are the rise in the wage premium of non-routine workers, resulting from capital-non-routine complementarity, as well as a reduction of the progressivity of the labor income tax schedule, which increases post-tax inequality. We show that ISTC alone accounts for roughly 15% of the change observed in post-tax income Gini, while the reduction in progressivity accounts for 16%. |
| Keywords: | Income Inequality, Taxation, Automation |
| JEL: | E21 H21 J31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:91960&r=all |
| By: | Sabina Szymczak (Gdansk University of Technology, Gdansk, Poland); Aleksandra Parteka (Gdansk University of Technology, Gdansk, Poland); Joanna Wolszczak-Derlacz (Gdansk University of Technology, Gdansk, Poland) |
| Abstract: | This paper examines the relationship between the relative position of industries in Global Value Chains (GVCs) and wages in ten Central and Eastern European countries in the period 2005-2014. We combine GVC measures of global import intensity of production, upstreamness (distance from final use), and the length of the value chain (based on WIOD) with micro-data on workers from EU-SILC. We find that the wages of CEEC workers are higher when their industry is at the beginning of the chain, far from final demand (high upstream) or at the end (low upstreamness – sectors close to final demand) than in the middle. Secondly, wage changes depend on the interplay between upstreamness and GVC intensity. In sectors close to final demand, greater production fragmentation, measured either by global import intensity or by vertical specialisation, is associated with lower wages. Higher upstream, this effect is not sustained. |
| Keywords: | wage, GVC, upstreamness, production fragmentation, CEECs |
| JEL: | F14 F16 J31 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:gdk:wpaper:53&r=all |
| By: | Fernando Rios-Avila; Fabiola Saavedra Caballero |
| Abstract: | With the rapid increase in educational attainment, technological change, and greater job specialization, decisions regarding human capital investment are no longer exclusively about the quantity of education, but rather the type of education to obtain. The skills and knowledge acquired in specific fields of study are more valuable for some jobs compared to others, which suggests the existence of differences in the quality of the education-occupation match in the labor market. With this premise in mind, this paper aims to estimate the effect of the quality of this education-occupation job match on workers' wages and to explore the factors that contribute to the existence of such mismatch among workers with higher education (college or more). Using data from the American Community Survey 2010-16, we construct two indices that measure the quality of the education-occupation match: based on the predicted and observed distribution of workers using their fields of education and their jobs' occupation classification. Results suggest there is a wage gap of around 3-4 percent when comparing workers that have good job matches to those who have bad matches. Given the importance of the penalty for mismatched jobs, we find that structural characteristics such as unemployment, and individual characteristics such as gender, race, immigration status, and even homeownership affect the quality of horizontal mismatch as well. |
| Keywords: | Educational Mismatch; Earnings; Wage Premiums; Educational Economics |
| JEL: | I21 J24 J31 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_922&r=all |
| By: | Jirjahn, Uwe; Mohrenweiser, Jens; Smith, Stephen C. |
| Abstract: | From a theoretical viewpoint, there can be market failures resulting in an underprovision of occupational health and safety. Works councils may help mitigate these failures. Using establishment data from Germany, our empirical analysis confirms that the incidence of a works council is significantly associated with an increased likelihood that the establishment provides more workplace health promotion than required by law. This result also holds in a recursive bivariate probit regression accounting for the possible endogeneity of works council incidence. Furthermore, analyzing potentially moderating factors such as collective bargaining coverage, industry, type of ownership, multiestablishment status and product market competition, we find a positive association between works councils and workplace health promotion for the various types of establishments examined. Finally, we go beyond the mere incidence of workplace health promotion and show that works councils are positively associated with a series of different measures of workplace health promotion. |
| Keywords: | Non-union employee representation,works council,occupational health and safety,workplace health promotion |
| JEL: | I18 J28 J50 J81 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:312&r=all |
| By: | Pastore, Francesco (Università della Campania Luigi Vanvitelli); Pompili, Marco (Ismeri-Europa) |
| Abstract: | This evaluation study aims to assess the impact of PIPOL, an integrated program of active labor policies, on the employment integration of benefit recipients. To address the issue, we have resorted to a counterfactual approach with data from two main sources: the program administration and compulsory communications on employment and unemployment spells. We found a net impact of 5% on average for on-the-job training, but no impact for off-the-job training. On-the-job training also affects the probability to find permanent work (+3%). This is consistent with the view that young people have excellent theoretical, but very little work-related competences. Off-the-job training does affect the probability to experience at least one labor contract after 2016. These results are partly due to a lock-in effect, namely the tendency of those who attend training programs to delay their job search. Interestingly, we found that the program has a different impact for different typologies of recipients and different types of intervention. In a nutshell, active labor policy works when it generates work-related competences. |
| Keywords: | youth unemployment, school-to-work transition, professional training, on-the-job training, matching, evaluation |
| JEL: | D04 J48 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12074&r=all |
| By: | Vincent Vandenberghe (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | The rising cost of old-age dependency in Europe and elsewhere invariably leads to reforms aimed at raising the effective age or retirement. But do older individuals have the health/cognitive capacity to work longer? Following Cutler et al. (2012), this paper asks how much older individuals could work if they worked as much as their younger (50-54) counterparts in similar health/with equal cognitive performance. Contrary to existing papers, this one uses international, European, comparable panel evidence available in the Survey of Health, Ageing and Retirement in Europe (SHARE). It considers both physical health and cognition; and health consists of subjective and objective measures. Also, it examines the extensive and intensive margins of work (employment and hours): existing papers only consider the former. Results are essentially fivefold. First, declines in health significantly affect employment. Second, the impact on hours is statistical significant but of much smaller magnitude. People suffering from ill health rarely adjust hours; they rather stop working altogether. Third, cognition is not fundamentally affected by ageing, and it adds little to our capacity to predict how work capacity evolves with age. Fourth, identification issues exist and must be addressed. They comprise unobserved heterogeneity across respondents, justification bias or proxying/measurement errors regarding health. Finally, declining health/cognition explain at most 31% of the actual labour supply reduction between 50 and 70. This confirms the existence of a, currently largely underused, work capacity among older individuals. |
| Keywords: | Ageing, Health, Cognition, Labour Supply, Work Capacity |
| JEL: | J22 I10 J26 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2019002&r=all |