Productivity effects of knowledge transfers through inter-firm labour mobility

September 8, 2020

A matched employer-employee dataset combined with modern matching methods and a difference-in-differences (DiD) estimator is used to examine whether firms that have recruited workers from knowledge-intensive firms (KIFs) obtain higher productivity and/or employment in comparison to firms that only have recruited workers from other firms. We find statistically significant differences between the treatment and control groups in both total factor productivity (TFP) and employment, i.e., recruitments from KIFs actually impacts both TFP and employment. For TFP, however, it appears that an initial knowledge level is required for firms to generate economic value from KIF recruitment. The effects are similar in magnitude across the groups of recruited workers (education, occupation, and experience), i.e., the effects cannot be explained by heterogeneity among recruited workers. We conclude that labor mobility is an important mechanism for the transfer of knowledge and ideas and that this process may result in productivity improvements in recipient firms.