Misallocation and Growth
- (pp. 1149-71)
AbstractThis paper models growth via on-the-job learning when firms and workers are heterogeneous. It is an overlapping generations model in which young agents match with the old. More efficient assignments lead to faster long-run growth, more inequality, and less turnover in the distribution of human capital. Constant-growth paths are characterized for general functional forms and then, for the Cobb-Douglas case, the transition dynamics are solved analytically when the skill of the young is log-normally distributed and the initial human capital of the old generation is also log-normal. Growth and inequality move together on the transition to the balanced growth path.
Citation2014. "Misallocation and Growth." American Economic Review, 104 (4): 1149-71. DOI: 10.1257/aer.104.4.1149
- D83 Search; Learning; Information and Knowledge; Communication; Belief
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J31 Wage Level and Structure; Wage Differentials
- J41 Labor Contracts