Eric Bruno Klemm

Abstract: Older workers are often viewed as obstacles to innovation, suggesting that their exit allows firms to reallocate resources toward new capital and technology. I argue instead that older, experienced workers support both the continuity of current production and the capacity to integrate new technologies into existing operations. The key empirical challenge is that when retirements are anticipated, firms have time to transfer knowledge internally, making the productivity value of older workers difficult to observe. I address this by studying a 2014 German pension reform that unexpectedly lowered the early retirement age for experienced workers by up to 29 months, inducing a sudden and unanticipated loss of long-tenured employees. Firms exposed to the reform reduce capital accumulation, delay technology adoption, and experience subsequent declines in revenue and value added, consistent with the erosion of firm-specific human capital. To interpret these findings, I develop a stylized model in which older workers transfer uncodified, firm-specific knowledge that is essential for maintaining legacy capital and integrating new technologies into firms’ operations. The model predicts, and the data confirm, that unexpected retirements weaken firms’ ability to sustain production and slow the pace of technological upgrading.

Abstract: This paper examines the determinants of cross-sectional and lifecycle inequality using a lifecycle earnings process model that incorporates earnings mobility and non-employment risks across birth cohorts and over time. We show that changes in unobserved skill prices and the variance of individual fixed effects across cohorts are the primary drivers of inequality. While non-employment risk contributes little to cross-sectional inequality, it is central to explaining lifecycle inequality. To explain the increase in the variance of fixed effects, we interpret these within a Roy model as realized productivity influenced by both ability and task choice. We provide evidence that technological change can amplify inequality beyond the canonical skill price channel by strengthening the mapping from ability to productivity through within-occupational task sorting. 

Abstract: How does demographic aging, through its gradual impact on firms’ workforce age composition, affect firm productivity? Because the age structure of a firm’s employees reflects life-cycle patterns, selective hiring, and survivorship bias, its relationship with productivity is inherently confounded. Using matched administrative employer–employee data from Germany, we leverage exogenous variation in the age structure of local labor markets to instrument for firms’ workforce age. Our results show that a higher share of older workers is associated with lower firm productivity compared with other firms in the same industry, suggesting that demographic aging may modestly weigh on aggregate productivity growth.

Abstract: How do wage and earnings dynamics differ between immigrants and natives over the lifecycle? This project models the full income process for both groups using German administrative data, decomposing within- and between-group inequality into permanent and transitory components. I show that immigrants face larger but less persistent wage shocks and more frequent non-employment spells early in their careers, while differences in permanent earnings components are limited. The results indicate that slower convergence between immigrants and natives reflects higher short-term volatility in immigrant earnings rather than lasting differences in earning potential.

Abstract: We develop an overlapping-generations general equilibrium model calibrated to the Eurozone and its largest economies. The model links fertility, longevity, migration, female labor force participation, and educational attainment to the size and composition of the labor force. Our framework disentangles the historical contribution of these mechanisms to capital accumulation and output growth and explores their implications for future macroeconomic adjustment in aging economies.