Working Papers

*Supersedes 'Worker Turnover, Disruptive Innovation, and Productivity Growth' 

Abstract: 

This paper demonstrates that increased worker mobility between employers promotes innovation and accelerates growth. In the US, metropolitan areas subject to state-level court rulings that reduced the enforceability of non-compete (NC) clauses experienced increases in employment-to-employment (EE) hire rates. These areas also produced higher-quality patents and achieved faster productivity growth. Motivated by these empirical results, this paper develops an endogenous growth model with a frictional labor market and worker-embodied knowledge that increases innovation efficiency. Accelerated knowledge flows associated with EE transitions increase innovation and growth. The calibrated model shows that a permanent ban on NC clauses raises the annual growth rate by 0.2–0.3 percentage points, and the effect strengthens over time. Without the knowledge channel, the increase in growth rate is underestimated by more than 50%.

*Companion to 'Worker Turnover, Disruptive Innovation, and Productivity Growth'

Abstract:  

Productivity growth is closely related to worker mobility when firms are heterogeneous in levels and growth rates of productivity. Using a Diamond- Mortensen-Pissarides model of labor market frictions augmented with innovation, I quantify the impact of labor market trends on productivity slowdown after the 2000s. Four labor market trends are put into the model: lower birth, job destruction, and start-up rates, and lower matching efficiency. The calibrated model shows that decreased matching efficiency and job destruction rates are more detrimental to incumbent innovation and growth than slow population growth and lower start-up rates after the 2000s.

*CESifo Working Paper N.11037. *Supersedes 'How Task-Biased is Capital-Embodied Innovation?' 

** Revision Requested

*** New draft! 

Abstract: 

This paper develops an occupation-level measure of Capital-Embodied Innovation (CEI). The effect of CEI on labor-capital substitution is heterogeneous, depending on the similarity between capital and occupational tasks. Specifically, CEI directed toward task-similar capital (CEI-s) triggers a stronger displacement of labor by capital compared to CEI directed toward task-dissimilar capital (CEI-d). Furthermore, occupational exposure to CEI varies in both magnitude and composition. Occupations with higher labor costs relative to capital are subject to higher levels of CEI-s but lower levels of CEI-d. Ultimately, CEI accounts for more pronounced declines in labor share observed in these occupations.

*Supersedes 'Growth and Labor Reallocation: Vertical versus Horizontal Innovation' 

** Revision requested

Abstract: 

This paper explores how growth and labor reallocation are related when producers innovate yet also face demand shocks. Incumbent producers drive long-run growth by improving existing products or expanding into new product markets, which increases employment. However, employment growth stemming from positive demand shocks does not generate growth. Calibrating the model with German innovation survey data reveals that only 30% of incumbent job creation is attributable to innovation. Most growth originates from own-product improvements, which involve relatively modest labor reallocation. Ignoring demand shocks in the calibration overstates the role of product expansion while understating the impact of own-product improvements on growth. Moreover, the model indicates that slow population growth substantially lowers growth and welfare but has only a small impact on incumbent job creation.