Getting Old Is No Picnic? Sector-Specific Relationship Between Workers Age and Firm Productivity

ABSTRACT

This study provides new evidence on sector-specific differences in the age-productivity profiles in a country that has witnessed substantial shifts in the economic structure and features flexible labour market and high labour force participation among the elderly. Using a matched employer–employee dataset of Latvian firms, the paper unveils a conventional hump-shaped or downward sloping relationship in manufacturing and trade, but almost no or very small negative effect of ageing workforce in knowledge-intensive service sectors that largely employ high-skilled white-collar employees. The results suggest that investing in human capital, in particular training of elderly employees as well as addressing severe skill shortages in the ICT services sector have to be considered to reduce the downward pressure of ageing on firm performance. It also highlights the importance of efforts made by public institutions in improving health care and promoting healthier lifestyles to increase the number of healthy life years. 

Keywords: firm productivity, ageing population, age-productivity profile

JEL codes: C23, L25