Research

Population aging is a common trend in developed countries. This paper asks to what extent demographic change contributes to shifts in the wage structure across and within age groups. Using German linked-employer-employee data, I document that the age wage differential is declining over time. To study the impact of aging, I construct a search and matching model featuring young and old workers who are differentiated by their search intensities. I calibrate the model and conduct a counterfactual exercise simulating an increase in aging.

An increase in the share of service sector employment and the corresponding decrease in goods sector employment has not been related to changing firm dynamics in the long run. I empirically show that structural transformation is mainly related to very large firms in both sectors. I then develop a two-sector model with firm heterogeneity to explore whether the drivers of structural transformation can also explain the decline in business dynamism. With a simple calibration, I can replicate some of the findings of previous literature on structural transformation and firm dynamics.