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Knowledge Misallocation And Growth

Author

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  • Raurich, Xavier
  • Sánchez-Losada, Fernando
  • Vilalta-Bufí, Montserrat
Abstract
We develop a growth model where knowledge is embodied in individuals and diffused across sectors through labor mobility. The existence of labor mobility costs constrains mobility and thus generates labor misallocation. Different levels of labor misallocation imply different levels of exploitation of available knowledge and therefore different total factor productivity across countries. We derive a positive relationship between growth and labor mobility, which is consistent with the empirical evidence, by assuming aggregate constant returns to capital. We also analyze the short- and long-run effects of labor mobility costs in the case of decreasing returns to capital. It turns out that changes in mobility costs have larger economic effects when different types of workers have small rather than large complementarities. Finally, we show that different labor income taxes or labor market tightness imply different rates of labor mobility and therefore can explain differences in Gross Domestic Product across countries.

Suggested Citation

  • Raurich, Xavier & Sánchez-Losada, Fernando & Vilalta-Bufí, Montserrat, 2015. "Knowledge Misallocation And Growth," Macroeconomic Dynamics, Cambridge University Press, vol. 19(7), pages 1540-1564, October.
    • Handle: RePEc:cup:macdyn:v:19:y:2015:i:07:p:1540-1564_00
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    Cited by:

    1. Alonso-Carrera, Jaime & Raurich, Xavier, 2018. "Labor mobility, structural change and economic growth," Journal of Macroeconomics, Elsevier, vol. 56(C), pages 292-310.
    2. Samuel Danthine & Markus Poschke & Stephane Auray, 2016. "Understanding Severance Pay Determination: Mandates, Bargaining, and Unions," 2016 Meeting Papers 967, Society for Economic Dynamics.
    3. Auray, Stéphane & Danthine, Samuel & Poschke, Markus, 2014. "Mandated versus Negotiated Severance Pay," IZA Discussion Papers 8422, Institute of Labor Economics (IZA).

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