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Working Paper

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

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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.
12.01.1991ISSN 2573-7953 WP 91-19DOI 10.26509/frbc-wp-199119

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Kotlikoff, Laurence, and Jagadeesh 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. https://doi.org/10.26509/frbc-wp-199119