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KNOWLEDGE MISALLOCATION AND GROWTH

Published online by Cambridge University Press:  25 March 2014

Xavier Raurich ,
Fernando Sánchez-Losada  and
Montserrat Vilalta-Bufí
Xavier Raurich*
Affiliation:
Universitat de Barcelona and Centre de Recerca en Economia del Benestar (CREB)
Fernando Sánchez-Losada
Affiliation:
Universitat de Barcelona and Centre de Recerca en Economia del Benestar (CREB)
Montserrat Vilalta-Bufí
Affiliation:
Universitat de Barcelona and Centre de Recerca en Economia del Benestar (CREB)
*
Address correspondence to: Xavier Raurich, Universitat de Barcelona, Departament de Teoria Econòmica, Facultat d'Economia i Empresa, Avinguda Diagonal 696, 08034 Barcelona, Spain; e-mail: [email protected].
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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.

Keywords

Economic GrowthLabor MobilityKnowledge Misallocation
Type
Articles
Information
Macroeconomic Dynamics , Volume 19 , Issue 7 , October 2015 , pp. 1540 - 1564
Copyright
Copyright © Cambridge University Press 2014 

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