Knowledge Spillovers through Labour Mobility: An Employer-Employee Analysis

Using a 16-year employer-employee panel dataset that contains the entire population of firms and workers in Argentina, this paper provides evidence of the benefits of public support for firm-level innovation for the firms that received support, the workers who were employed by them, and the firms that hired beneficiary workers. The results confirm that participant firms improve their performance and generate valuable productive knowledge, which spills over to workers who directly participated in the program and is diffused through labour mobility to other firms. The worker-level results show that workers exposed to innovation projects receive higher wages. High-skilled workers receive most of the benefits from exposure to innovation, and the wage premium is higher for workers who moved to other firms. At the firm level, the paper provides evidence that hiring workers previously exposed to innovation projects is associated with an increase in firm performance. The findings suggest that labour mobility is an important mechanism for transmitting knowledge between firms.