Skills, Job Mobility and Productive Efficiency

Abstract

Making use of a survey that directly assesses the participants’ cognitive skills, I study the relation between skills and job mobility in a large international comparison of 32 countries. Motivated by the canonical on-the-job search model, I measure job mobility by the ratio of the job-finding rate on the job to the transition rate into unemployment. A higher ratio of these rates induces, ceteris paribus, first-order stochastic dominance in the distribution of workers over jobs, indicating a more efficient allocation of resources across firms. On average across the 32 countries, a one-standard-deviation increase in numeracy skills is estimated to double the ratio of the job-finding rate on the job to the transition rate into unemployment. The positive association between skills and job mobility is statistically significant in a majority of countries. Furthermore, countries with a higher average level of skills tend to exhibit a higher degree of job mobility. The robust positive association between skills and job mobility suggests that skills contribute to a country’s productive efficiency by limiting the misallocation of resources across firms.