Creator: Engbom, Niklas Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 756 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.
Keyword: Demographics, Entrpreneurial choice, Labor turnover, Economic growth, and Employment Subject (JEL): J11 - Demographic Trends, Macroeconomic Effects, and Forecasts, E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity, and O40 - Economic Growth and Aggregate Productivity: General