Working hard in the wrong place: A mismatch-based explanation to the UK productivity puzzle |
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| Institution: | 1. MIT, Unites States;2. Federal Reserve Bank of New York, 33 Liberty St., New York, NY 11201, Unites States;3. IZA, Germany;4. New York University, United States;5. CEPR, United Kingdom;6. NBER, United States;1. International Monetary Fund, United States;2. Institute of Informatics, Warsaw University, Poland;3. Faculty of Economics & Christ''s College, University of Cambridge, United Kingdom;1. Division of Social Science, New York University Abu Dhabi, United Arab Emirates;2. Center for Applied Economics, Department of Industrial Engineering, Universidad de Chile, Chile;1. University of Exeter, United Kingdom;2. University of Minho, NIMA, Portugal;3. University of Sussex and CEPR, United Kingdom;4. IZA, Germany;5. GDN, India |
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| Abstract: | The UK experienced an unusually prolonged stagnation in labor productivity in the aftermath of the Great Recession. This paper analyzes the role of sectoral labor misallocation in accounting for this “productivity puzzle”. If jobseekers disproportionately search for jobs in sectors where productivity is relatively low, hires are concentrated in the wrong sectors, and the post-recession recovery in aggregate productivity can be slow. Our calculations suggest that, quantified at the level of three-digit occupations, this mechanism can explain up to two thirds of the deviations from trend-growth in UK labor productivity since 2007. |
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| Keywords: | Mismatch Productivity Business cycles |
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