Working Paper: NBER ID: w4823
Authors: Boyan Jovanovic; Yaw Nyarko
Abstract: Most of our productive knowledge was handed down to us by previous generations. The transfer of knowledge from the old to the young is therefore a cornerstone of productivity growth. We study this process in a model in which the old sell knowledge to the young - - old workers train the young, and charge them for this service. We take an information-theoretic approach in which training occurs if a young agent watches an old worker perform a task. This assumption has plenty of empirical support -- in their first three months on the job, young workers spend about five times as long watching others work as they do in formal training programs. Equilibrium is not constrained Pareto optimal. The old have private information, and this gives rise to an adverse selection problem: some old agents manage to sell skills that the young would not buy (if only they knew exactly what they were buying). We derive the implications for the lifetime of technological lines, and we show that the model generates a negative relation between a firm's productivity and its probability of failure.
Keywords: Human Capital; Knowledge Transfer; Productivity Growth
JEL Codes: J24; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| transfer of knowledge from older workers (J24) | productivity growth (O49) |
| older workers train younger workers (J24) | productivity growth (O49) |
| training process (young workers observe older workers) (J24) | productivity (O49) |
| probability of failure (C29) | productivity (O49) |
| inefficiencies in training market (J24) | lower productivity (O49) |