Labor mobility is considered to be an important source of knowledge externalities, making it difficult for firms to appropriate returns to research and development (R&D). Interfirm transfers of knowledge embodied in people should be analyzed within a human capital framework. Testing such a framework, I find that the technical staff in R&D‐intensive firms pays for the knowledge they accumulate on the job through lower wages early in their career. They later earn a return on these implicit investments through higher wages. This suggests that the potential externalities associated with labor mobility are, at least partially, internalized in the labor market.

We study the migration behavior of displaced workers and find that job displacement increases regional mobility. We find, however, that noneconomic factors, such as family ties, are very important for the migration decision and that there is strong heterogeneity in outcomes. We find large income losses for workers who move to regions where they have family or to rural areas, while, for example, rural to urban movers realize a significant long-term earnings increase. We also find that life events related to fertility, divorce, and new relationships correlate with mobility after job loss and may partly explain the large income losses.