The Land of Opportunity: Social Mobility and Firm Productivity

Abstract

 Social mobility is a key factor in promoting economic development. In this paper, we quantitatively analyzed the impact of social mobility on firm-level total factor productivity (TFP) based on micro-data, providing empirical evidence for the government to issue policies that promote the social mobility of labor force and talent. First, we used the data of the China Labor-force Dynamic Survey (CLDS) to measure absolute mobility at the city level. Second, we analyzed how social mobility affects firms' TFP from three channels. We found that higher social mobility contributes to improving local firms' overall TFP. Heterogeneity analysis showed that social mobility has a positive effect on improving firms' global TFP, which is more salient in private enterprises, small- and medium-sized enterprises, and technologyintensive industries in a given city. In addition, we also find that the positive effect of social migration on firm TFP is mainly through human capital allocation, fairness perception, and technological innovation. Our findings provide theoretical guidance for emerging economies to cope with the challenges caused by the reindustrialization of OECD countries.