The productivity impact of short-term labor mobility across industries

Plain English Summary COVID-19 has imposed restrictions on labor mobility and this turns out to be relevant for productivity and economic growth. Business visits (BVs) are a proper proxy (unique information is taken from the US National Business Travel Association) to measure short-term mobility. Sectoral data in 14 countries over the period 1998-2013 are used. Results do reveal that BVs have a positive impact on labor productivity. However, this effect is more relevant in those sectors and economies at a lower stage of productivity evolution, i.e., the lower the initial productivity level, the larger the effect of BVs on productivity. Therefore, BVs play a relevant role in sectors and countries lagging behind in terms of productivity. Policy makers should foster, in the post-pandemic recovery, short-term labor mobility through adequate incentives and tax exemptions, particularly in those sectors where BVs are less frequent and where productivity growth is below the average. The restrictions on labor mobility imposed in the COVID-19 pandemic heighten the need to review in detail the role of mobility in improving productivity and fostering economic growth. In this study, we carry out a comprehensive analysis of business visits (BVs) understood as a productivity-enhancing intrapreneurial strategy, using the most extensive set of data available, covering 33 sectors and 14 countries during the period 1998-2013. Our database merges unique information on expenditures on BVs by sector, country, and year, sourced from the US National Business Travel Association, with OECD and World Bank productivity data. We find that BVs raise labor productivity in a significant way, but short-term labor mobility exhibits decreasing returns, being more crucial in those firms, sectors, and countries characterized by less mobility and by lower productivity performances.