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Abstract:

This project aims to investigate the potential impact of labor market imperfections on aggregate productivity growth. More precisely, we will firstly determine the impact of labor adjustment costs on measured misallocation. To this end, we will use a recent policy change in Belgium, effectively lowering firing costs for white-collar workers and increasing them for blue-collar workers. Secondly, we will investigate the relation between labor unions and misallocation. As such, the project fits in the recent literature determining the importance of input misallocation for aggregate productivity and welfare, within industries, countries and over time.