Centre for Vocational Education Research LSE RSS Email Facebook Twitter


CEP discussion paper
Aggregate Growth and the Efficiency of Labour Reallocation
Simon Burgess and Dan Mawson
August 2003
Paper No' CEPDP0580:
Full Paper (pdf)

JEL Classification: O40;J63

Tags: growth; labour market efficiency; labour market institutions

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.