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Does your job fit with your talent? Insights for labor market fluidity and aggregate productivity

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  • Tanaka, Kosho

Abstract

This study examines how labor turnover activates talent utilization and thereby enhances aggregate productivity and macroeconomic performance. The model shows that dismissal regulations reduce labor turnover by shifting firms’ incentives from improving job quality through worker replacement to maintaining headcount. As a result, workers have fewer opportunities to identify suitable job matches, leading to declines in aggregate productivity and output, as well as a more pronounced reduction in welfare. The analysis highlights post-hire learning — rather than pre-hire screening — as a key channel enabling improved talent utilization and unlocking economic potential. This channel becomes particularly important as policy discussions place greater emphasis on well-being and technological disparities across workers widen.

Suggested Citation

  • Tanaka, Kosho, 2026. "Does your job fit with your talent? Insights for labor market fluidity and aggregate productivity," Economic Modelling, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:ecmode:v:161:y:2026:i:c:s0264999326001641
    DOI: 10.1016/j.econmod.2026.107635
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    Keywords

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    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

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