Productivity Growth and Workers’ Job Transitions: Evidence from Censal Microdata

A large body of work has highlighted the importance of employment reallocation as a driver of aggregate productivity growth, but there is little direct evidence on the extent and nature of this process at the worker-firm level. We use an administrative matched employer-employee census for Chile to provide novel insights into the relationship between job transitions and productivity variation across firms. As many theories would predict, worker flows from lower- to higher-productivity firms are larger than those of the opposite sign. Empirically, however, this is only marginally so. Almost half of all transitions occur “down the firm productivity ladder.” This process is also highly heterogeneous along several dimensions. Up-the-ladder flows are more likely for direct job-to-job transitions than those that pass through non- employment. They are also much more likely for young, high-skilled workers, whose job transitions comprise in an accounting sense the lion’s share of aggregate productivity change. Interestingly, workers with the highest job turnover rates contribute proportionally the least to aggregate productivity changes. Put together, this evidence implies that the productivity mechanics of job reallocation yields a net benefit, but this hides massive and heterogeneous gross flows underneath.