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Estimating A Firm's Age-Productivity Profile Using The Present Value Of Workers' Earnings


In hiring new workers, risk-neutral employers equate the present expected value of each worker's compensation to the present expected value of his/her productivity, Data detailing how present expected compensation varies with the age of hire embed, therefore, information about how productivity varies with age. This paper infers age-productivity profiles using data on the present expected value of earnings of new hires of a Fortune 1000 firm. For each of the five occupation/sex groups considered, productivity falls with age, with productivity exceeding earnings for young workers and vice versa for older workers.


Suggested citation: Kotlikoff, Laurence, and Jagdeesh Gokhale, 1991. “Estimating A Firm's Age-Productivity Profile Using The Present Value Of Workers' Earnings,” Federal Reserve Bank of Cleveland, Working Paper no. 91-19.

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