Working Paper

Firm and Worker Dynamics in an Aging Labor Market

Abstract: I develop an idea flows theory of firm and worker dynamics in order to assess the consequences of population aging. Older people are less likely to attempt entrepreneurship and switch employers because they have found better jobs. Consequently, aging reduces entry and worker mobility through a composition effect. In equilibrium, the lower entry rate implies fewer new, better job opportunities for workers, while the better matched labor market dissuades job creation and entry. Aging accounts for a large share of substantial declines in firm and worker dynamics since the 1980s, primarily due to equilibrium forces. Cross-state evidence supports these predictions.

Keywords: Demographics; Employment; Economic growth; Labor turnover; Entrepreneurial choice;

JEL Classification: E24; J11; O40;

https://doi.org/10.21034/wp.756

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Working Papers

Publication Date: 2019-04-10

Number: 756

Pages: 58 pages