Labour immobility between industries: Consequences for the macroeconomy

Basu, Parantap; Chivers, David; Park, Changhyun

Abstract

Workers are failing to move to the most productive industries, despite the offer of higher wages. In order to explain this phenomenon, we provide evidence that when an industry experiences a positive, labour-productivity shock, it is subsequently harder for firms to find workers. This is represented by a fall in relative matching efficiency. We present a stylised two-sector search and matching model to show the consequences of this negative relationship. Our calibrated model not only closely tracks US wages and employment share over time, but also reveals substantial output losses as a result of labour misallocation between industries.

Citation

Basu, P., Chivers, D., & Park, C. (2024). Labour immobility between industries: Consequences for the macroeconomy. Economic Systems, 48(2), Article 101184. https://doi.org/10.1016/j.ecosys.2024.101184

• Journal Article Type: Article
• Acceptance Date: Jul 7, 2023
• Online Publication Date: Jan 20, 2024
• Publication Date: 2024-06
• Deposit Date: Aug 15, 2023
• Publicly Available Date: Jan 21, 2026
• Journal: Economic Systems
• Print ISSN: 0939-3625
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 48
• Issue: 2
• Article Number: 101184
• DOI: https://doi.org/10.1016/j.ecosys.2024.101184
• Public URL: https://durham-repository.worktribe.com/output/1717682