The Role of Workers in Knowledge Diffusion Across Firms

With about 1/5th of all jobs changing each year, labor mobility is a potentially significant source for idea exchange in the economy. In this paper, we analyze the effect of labor mobility and innovation on productivity growth in the economy. First, by leveraging administrative data for Sweden, we show suggestive evidence at the macroeconomic level that both the extent and direction of worker mobility correlates with firm productivity. With event-study analysis based on exogenous worker deaths and shift share international trade shocks, we proceed to verify such relationship at the microeconomic level. Second, we develop a multi-worker framework with random search and on-the-job mobility to estimate the relative size of the contribution of worker mobility and R&D to growth. Estimated on a balanced growth path using the Swedish microeconomic data, we find that around 60% of output growth can be attributed to firm innovation. Intuitively, our results change significantly with the extend of worker mobility and suggest that slowdown of worker mobility can depress aggregate economic growth.