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The age-wage-productivity puzzle: evidence from the careers of top earners

Scarfe, R., Singleton, C. ORCID: https://orcid.org/0000-0001-8247-8830, Sunmoni, A. O. ORCID: https://orcid.org/0000-0003-3496-0168 and Telemo, P. (2023) The age-wage-productivity puzzle: evidence from the careers of top earners. Economic Inquiry. ISSN 1465-7295

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To link to this item DOI: 10.1111/ecin.13191

Abstract/Summary

There is an inverted u-shaped relationship between age and wages in most labour markets and occupations, but the effects of age on productivity are often unclear. We use panel data on productivity and salaries in a market of high earners, professional footballers (soccer players) in North America, to estimate age-productivity and age-wage profiles. We find stark differences between these profiles; wages continue to increase for several years after productivity has peaked, before dropping sharply at the end of a career. This discrepancy poses the question: why are middle-aged workers seemingly overpaid relative to their contemporaneous productivity? The richness of our dataset allows us to investigate a range of possible mechanisms that could be responsible, including institutional factors, unobserved elements of productivity, and a talent discovery theory, by which teams pay younger players less because their productivity is more uncertain. We find some evidence that tentatively supports this last mechanism.

Item Type:Article
Refereed:Yes
Divisions:Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:112960
Uncontrolled Keywords:Labour productivity; Wages; Ageing; Sports Labour Markets
Publisher:Wiley

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