This paper seeks to gain
insights on the relationship between growth and unemployment, when considering
heterogeneous agents in terms of age. We introduce life cycle features in the
endogenous job destruction framework à la Mortensen and Pissarides (1998).
We show that, under the
assumption of homogeneous productivity among workers, firms tend to fire older
workers more often than young ones, when deciding whether to update or not a
technology: there is an equilibrium where the creative destruction effect dominates
over the capitalization effect for old workers, whereas the capitalization effect
dominates for young workers.
This discrimination against
older workers can be moderated when we introduce heterogeneity (in terms of
productivity) among workers. We also provide empirical support for these theoretical
findings using OECD panel data and numerical simulations of the model.
