The Role of Education: Mobility Increasing or Mobility Impeding?

Abstract

This paper studies the influence of education on labor and geographic mobility. Mobility is an important equilibrating factor in a changing economy. Therefore, any factor that induces mobility also alleviates the symptoms of disequilibrium, and any factor that inhibits mobility also impedes economic adjustments. Does the high level of education in modern industrial societies help or hurt economic transitions? Economic theory provides conflicting arguments. On the one side, the theory of firm-specific capital predicts that education increases job duration and therefore inhibits job mobility (Jovanovic, 1979). On the other side, education should increase mobility in markets with imperfect information because better educated persons should be better able to collect and process information, reducing search and transactions costs. In a PSID subsample consisting of 736 individuals, we observed labor and geographic mobility from 1968 to 1982 and related it to the level of education at 1968. It appears that labor and geographic mobility are governed by quite different behavioral mechanism. Education strongly affects future labor and geographic mobility, but in opposite ways. A high level of education inhibits labor mobility, but increases geographic mobility.