Working Paper: CEPR ID: DP3848
Authors: Simon Burgess; Daniel Mawson
Abstract: 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.
Keywords: growth; labour; efficiency; labour market institutions
JEL Codes: J63; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher labour market efficiency (J48) | faster rate of aggregate growth (O40) |
| inefficient labour markets (J46) | slower growth (O49) |
| reduction in inefficiency measure (D61) | increase in conditional growth rate (O41) |
| labour market efficiency (J48) | significant determinant of aggregate growth (E20) |