The role of workers in knowledge diffusion across firms

We analyze the effect of labor mobility and innovation on productivity growth. With event-study analysis based on exogenous worker deaths and shift-share international trade shocks, we show that both the extent and direction of worker mobility affect firm productivity. We develop a multi-worker-firm framework with random search and on-the-job mobility to estimate the relative contribution of mobility and R&D to growth. Estimated on a balanced growth path using Swedish microeconomic data, we find that over 70% of output growth can be attributed to worker mobility. Our results suggest that a slowdown of worker mobility can depress aggregate economic growth.