DP3848 Aggregate Growth and the Efficiency of Labour Reallocation

Author(s): Simon Burgess, Daniel Mawson
Publication Date: March 2003
Keyword(s): growth, labour efficiency, labour market institutions
JEL(s): J63, O40
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3848

We consider the potential importance of labour market efficiency for aggregate growth. The idea is that efficient labour markets move workers more quickly from low to high productivity sites, thereby raising aggregate productivity growth. We define a measure of labour market efficiency as a structural parameter from a matching function. Using labour market data on 15 OECD countries, we estimate this and show that it has a significant effect on growth. The results are robust to a number of different estimation techniques. The quantitative impact of market efficiency is not trivial.