Kyle Herkenhoff, University of Minnesota: Worker Mobility and the Diffusion of Knowledge
Department seminar. Kyle Herkenhoff is an Assistant Professor at the University of Minnesota. He will present a paper entitled "Worker Mobility and the Diffusion of Knowledge", co-authored by Jeremy Lise, Guido Menzio, and Gordon Phillips.
We develop a theory of teams to measure the way knowledge diffuses across workers. We extend the frictional sorting framework of Postel-Vinay and Robin  to allow for workers to influence each other's knowledge. Workers can search on-the job and leave their team to start a new team, carrying some of their knowledge with them. In contrast to standard sorting models, a firm's type is no longer exogenous; it is coworker human capital. Using a new methodolgy, we estimate the knowledge diffusion process and the degree of worker complementarities in production with micro wage data and job mobility patterns from the LEHD, as well as startup patterns from the Integrated LBD. Our estimated parameters imply both positive peer effects (lower types learning from higher types) and negative peer effects (higher types dislearning from lower types). We find that eliminating positive peer effects would lower output by 7%, eliminating negative peer effects would increase output by 11%, and eliminating on-the-job-search would reduce output by 17%. Our estimates also imply strong production complementarities. Setting production complementaries to zero, but still allowing for learning and worker flows, would reduce output by 52%. Remarkably, under the estimated parameters, welfare would only be .02% higher if we reshuffled workers to achieve the planner's allocation.