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Labor Mobility and Productivity Growth

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  • Xavier Raurich
  • Fernando Sanchez-Losada
  • Montserrat Vilalta-Bufi

    (Universitat de Barcelona)

Abstract

Growth models of learning-by-doing assume that knowledge learned in produc- tion gets freely and instantly spread to the whole economy. As a result, the econ- omy exhibits aggregate increasing returns and the total factor productivity (TFP) growth is endogenous. However, the assumption of instant diusion of knowledge seems unrealistic. Diusion of knowledge takes time and requires some channel of transmission. In this paper we assume this transmission channel is learning-by- hiring, since knowledge is embodied in workers. We present a model where the free and instant diusion of knowledge may exist only within sectors, but not across sectors. Diusion of knowledge across sectors can only occur through the mobility of labor and, therefore, the labor market determines both the level and growth of TFP. We investigate how labor mobility costs modify the equilibrium outcome of such an economy considering two scenarios: endogenous and exogenous growth. Moreover, we show that other labor market ine ciencies, such as labor income taxes or labor search costs, may reduce labor mobility and therefore modify TFP.

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Bibliographic Info

Paper provided by Universitat de Barcelona. Espai de Recerca en Economia in its series Working Papers in Economics with number 254.

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Length: 0 pages
Date of creation: 2011
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Handle: RePEc:bar:bedcje:2011254

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques. Tinent Coronel Valenzuela, Num 1-11 08034 Barcelona. Spain.
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  1. Javier Coto-Martínez & Carlos Garriga & Fernando Sánchez-Losada, 2007. "Optimal Taxation with Imperfect Competition and Aggregate Returns to Specialization," Journal of the European Economic Association, MIT Press, MIT Press, vol. 5(6), pages 1269-1299, December.
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