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Economic Growth through Worker Reallocation: The Role of Knowledge Spillovers

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  • Eero Mäkynen

    (University of Turku, Finland.)

Abstract

An establishment can improve its productivity by hiring workers from more productive establishments. Then, how important is worker reallocation for aggregate productivity growth? To study this question, I develop a general equilibrium model where knowledge transmits as workers reallocate from one job to another. The calibrated model suggests that the knowledge diffusion mechanism increases the aggregate productivity growth by 0.14 percentage points and enhances welfare. Additionally, the mechanism significantly amplifies the adverse effect of firing costs on aggregate outcomes.

Suggested Citation

  • Eero Mäkynen, 2021. "Economic Growth through Worker Reallocation: The Role of Knowledge Spillovers," Discussion Papers 147, Aboa Centre for Economics.
    • Handle: RePEc:tkk:dpaper:dp147
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    References listed on IDEAS

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    More about this item

    Keywords

    knowledge diffusion; firm dynamics; worker reallocation; economic growth;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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