Hausmann, Ricardo and Frank M. H. Neffe

Does technology require labour mobility to diffuse? To explore this, we use German social-security data and ask how plants that pioneer an industry in a location - and for which the local labour market offers no experienced workers - assemble their workforces. These pioneers use different recruiting strategies than plants elsewhere: they hire more workers from outside their industry and from outside their region, especially when workers come from closely related industries or are highly skilled. The importance of access to experienced workers is highlighted in the diffusion of industries from western Germany to the post-reunification economy of eastern German. While manufacturing employment declined in most advanced economies, eastern German regions managed to reindustrialise. The pioneers involved in this process relied heavily on expertise from western Germany: while establishing new manufacturing industries in the East, they sourced half of their experienced workers from the West.