Niklas Engbom, New York University

Exploiting variation across Swedish local labor markets between 1986 and 2018, I estimate that individuals are less likely to start new firms and switch employers in an older labor market. To account for these patterns, I propose a tractable equilibrium theory of growth with frictional labor markets. Workforce aging raises the level of output by shifting composition toward older individuals, who have had more time to find a good match with existing production technologies. The resulting higher opportunity cost of switching to new technologies reduces incentives to introduce them, lowering the growth rate of output. Due to the offsetting level and growth effects, aging generates an increase in growth through the mid-1990s, followed by lower growth that is expected to continue for another 30 years. The lower rate of creative destruction in the older economy lowers welfare for labor market entrants, but raises the value of the high-productive jobs typically held by older individuals.

DATE: Friday, March 3, 2023

TIME: 3:30-5:00 p.m.

LOCATION: Fronczak 444