Abstract
This study quantifies the effect of aging on the age-wage profile, using data from Japan, which is the fastest aging country in the world. Using a model with imperfect substitution among labor inputs in different age groups, we obtain two findings. First, the change in age composition of male workers accounts for more than 60 percent of the change in the age-wage profile after 2000. Second, incorporating the imperfect substitution aggregator into a macroeconomic model allows us to simulate more realistic wage and lifetime income for the age distribution of aging labor.
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