The impact of age complementarities and learning externalities on labor productivity : Evidence from German micro data

Chapter 2: Do age complementarities affect labor productivity? Evidence from German firm level data - In Germany, as in many other European countries, there will be a shift in the workforce age structure in the next decades. This chapter provides evidence how the shift in the relative labor supply affects labor productivity, taking into account that differently aged workers are suggested to be imperfect substitutes. Using a cross sectional linked employer-employee data set from 2012, translog cost functions are estimated. Taking into account the interaction of skills and age, age complementarities are analyzed within groups of low, medium, and high skilled workers. The results indicate that workers that belong to different age groups are complementary factors. But the degree of complementarity differs, depending on the age and the skill level of the workers. Simulating how the expected shift in the age structure affects labor productivity indicates that the productivity of younger and middle aged workers will increase. In contrast, the productivity of older workers will significantly decline caused by their increasing share in the workforce. Chapter 3: Quantifying the effect of labor market size on learning externalities - This chapter provides empirical evidence that individual labor productivity significantly depends on the size of the local labor market in which a worker previously acquired work experience. The analysis uses German micro data from the Institute for Employment Research (IAB) on transitions to employment within the period 2005 to 2011 and individual employment biographies from 1975 onwards. Analyzing the wages associated with the newly established employment relationships, suggests that dynamic agglomeration economies in general, and learning externalities in particular, play an important role in explaining individual labor productivity. Workers receive a significantly higher wage after acquiring experience in urban than in non-urban labor markets.