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Misallocation and Growth

Author

Listed:
  • Boyan Jovanovic

Abstract

This paper models growth via on-the-job learning when firms and workers are heterogeneous. It is an overlapping generations model in which young agents match with the old. More efficient assignments lead to faster long-run growth, more inequality, and less turnover in the distribution of human capital. Constant-growth paths are characterized for general functional forms and then, for the Cobb-Douglas case, the transition dynamics are solved analytically when the skill of the young is log-normally distributed and the initial human capital of the old generation is also log-normal. Growth and inequality move together on the transition to the balanced growth path.

Suggested Citation

  • Boyan Jovanovic, 2014. "Misallocation and Growth," American Economic Review, American Economic Association, vol. 104(4), pages 1149-1171, April.
    • Handle: RePEc:aea:aecrev:v:104:y:2014:i:4:p:1149-71
    Note: DOI: 10.1257/aer.104.4.1149
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    More about this item

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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