Working Paper: CEPR ID: DP11055
Authors: Christina Patterson; Aysegul Ahin; Giorgio Topa; Giovanni L. Violante
Abstract: The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this ?productivity puzzle.? If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors, and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two thirds of the deviations from trend-growth in UK labor productivity since 2007.
Keywords: Mismatch; Occupation; Productivity
JEL Codes: E24; J24; J63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor misallocation (J29) | productivity decline (O49) |
| sectoral labor misallocation (J42) | slower aggregate productivity recovery (O49) |
| disproportionate hiring in low-productivity sectors (J68) | productivity stagnation (O49) |
| differential rates of productivity growth across sectors (O49) | productivity gap (O49) |