Labour mobility may be caused by shifts in the derived demand for labour on the part of firms or sectors, or it may be caused by mismatches between workers and their jobs. Both reasons may be important, and this paper merges them into one model. It explores the consequences for (a) wage-tenure relationships and (b) the issue of sluggishness of wages caused by the implied selectivity of workers into preferred jobs and sectors.

Early entry has the advantage of higher revenues per unit of output early on. Late entry has the benefit of learning from the experience of earlier entrants, and hence lower production costs. The advantages are balanced off in a continuous-time, perfect-foresight equilibrium. Competition generates S-shaped diffusion, and staggered entry and exit. A monopolist will innovate less than a competitive industry, but the innovation that he does do, he will do sooner.