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TFP differences and the aggregate effects of labor mobility in the long run

TFP differences and the aggregate effects of labor mobility in the long run
TFP differences and the aggregate effects of labor mobility in the long run
The coexistence of barriers to labor mobility with large output-per-worker disparities driven by Total Factor Productivity (TFP) differences suggests that the world's labor force is misallocated across countries. We investigate the extent and consequences of this potential misallocation in the context of a simple two-location growth model, in which production requires capital, labor and an essential immobile factor (land). We characterize the magnitude of labor movements implied by an efficient long-run allocation, and derive their implications for capital accumulation. Quantitatively, even for moderate TFP differences, we find substantial increases in world output associated with efficient allocations. These output increases are driven by large movements of labor from low to high TFP countries, as well as by a sizeable increase in the capital stock and changes in its endogenous division across countries. Our results are robust to a large set of parameter values, including unrealistically conservative ones.

1935-1690
Klein, Paul
feea4bea-ca95-41ce-b72c-92b7d05247b1
Ventura, Gustavo J.
62a2540e-056e-4389-97d1-649d31959beb
Klein, Paul
feea4bea-ca95-41ce-b72c-92b7d05247b1
Ventura, Gustavo J.
62a2540e-056e-4389-97d1-649d31959beb

Klein, Paul and Ventura, Gustavo J. (2007) TFP differences and the aggregate effects of labor mobility in the long run. B.E. Journal of Macroeconomics, 7 (1). (doi:10.2202/1935-1690.1370).

Record type: Article

Abstract

The coexistence of barriers to labor mobility with large output-per-worker disparities driven by Total Factor Productivity (TFP) differences suggests that the world's labor force is misallocated across countries. We investigate the extent and consequences of this potential misallocation in the context of a simple two-location growth model, in which production requires capital, labor and an essential immobile factor (land). We characterize the magnitude of labor movements implied by an efficient long-run allocation, and derive their implications for capital accumulation. Quantitatively, even for moderate TFP differences, we find substantial increases in world output associated with efficient allocations. These output increases are driven by large movements of labor from low to high TFP countries, as well as by a sizeable increase in the capital stock and changes in its endogenous division across countries. Our results are robust to a large set of parameter values, including unrealistically conservative ones.

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More information

e-pub ahead of print date: 2007
Published date: 29 May 2007
Additional Information: Article 10

Identifiers

Local EPrints ID: 174069
URI: http://eprints.soton.ac.uk/id/eprint/174069
ISSN: 1935-1690
PURE UUID: 8e7ee976-466c-4361-9f7f-5f97777744aa

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Date deposited: 10 Feb 2011 11:07
Last modified: 14 Mar 2024 02:33

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Contributors

Author: Paul Klein
Author: Gustavo J. Ventura

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