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Knowledge misallocation and growth
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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 worker 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.
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RAURICH, Xavier, SÁNCHEZ-LOSADA, Fernando and VILALTA-BUFÍ, Montserrat. Knowledge misallocation and growth. Macroeconomic Dynamics. 2015. Vol. 19, num. 7, pags. 1540-1564. ISSN 1365-1005. [consulted: 17 of October of 2026]. Available at: https://hdl.handle.net/2445/57309