Age, Wage and Productivity: Firm-Level Evidence

In this paper, we estimate the profile of productivity by age through the estimation of production functions. ‘Productivity’ is defined as the average contribution of age groups to the productivity of firms. Our data are a matched employer-employee dataset covering about 70,000 firms in the late 1990’s in France. We find that productivity increases with age until age 40 and then remains stable after this age. Workers aged 40 and more are roughly 5% more productive than workers aged 35-39, while workers below 30 are 15% to 20% less productive. This result is moreover stable across sectors, since it holds in manufacturing, trading and services. Besides, the age-productivity profile is similar to the age-labor cost profile, which means that the hypothesis of a lower employability of older workers that would be explained by a significant wage-productivity gap seems rejected, at least before age 55. After this age, a slight decrease occurs, by 1 to 5 percentage point across sectors. Unfortunately, this decrease is not statistically significant and, due data and precision issues, the evidence for what happens after age 55 remains inconclusive.