Marco Ovidi (Catholic University of Milan)
Andrea Albanese and Lorenzo Cappellari
Assessing how individual productivity evolves over the life cycle is a crucial question in an aging society. Answering this question faces substantial challenges stemming from the measurement of individual productivity. Our approach extends the canonical AKM model of wage determination to allow person effects to vary as a worker’s age. Age-varying measures of earnings ability unveil heterogeneous career trajectories, with highly productive workers sorting to higher-paying employers in the starting stage of their career and moving to different firms to a lesser extent thereafter. Individual productivity is at least partly match-specific since it is significantly decreased by labour market shocks such as job loss. This result is particularly pronounced for high-productivity workers, despite their ability to minimise the penalties in employer pay after job loss.