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

Scarfe, Rachel and Singleton, Carl and Sunmoni, Adesola and Telemo, Paul (2024) The age-wage-productivity puzzle : evidence from the careers of top earners. Economic Inquiry, 62 (2). pp. 584-606. ISSN 1465-7295 (https://doi.org/10.1111/ecin.13191)

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Abstract

There is an inverted u-shaped relationship between age and wages in most labor markets, but the effects of age on productivity are often unclear. We use panel data 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; wages increase for several years after productivity has peaked, before dropping sharply at the end of a career. This poses the question: why are middle-aged workers seemingly overpaid? We investigate a range of possible mechanisms that could be responsible, only finding evidence that tentatively supports a talent discovery theory.

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