This paper studies a two-sector model of learning-by-doing that is partially transferable between sectors. There is a potential efficiency gain from intersectoral turnover when the sectors have different complementary production costs or learning curves of different steepness. If workers are liquidity restrained then there is a bias toward increased intersectroal turnover, resulting in socially inefficient career patterns. Excess turnover can even result in lower average productivity of workers

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... in both sectors. If individual productivity is decreasing toward the end of the career, then a liquidity restraint on the young workers will also cause retirement to be delayed beyond the socially efficient retirement age. Abstract This paper studies a two-sector model of learning-by-doing that is partially transferable between sectors. There is a potential ef ciency gain from intersectoral turnover when the sectors have different complementary production costs or learning curves of different steepness. If workers are liquidity constrained then there is a bias towards increased intersectoral turnover, resulting in socially inef cient career patterns. Excess turnover can even result in lower average productivity of workers in both sectors. If individual productivity is decreasing towards the end of the career, then a liquidity constraint on the young workers will also cause retirement to be delayed beyond the socially ef cient retirement age. (JEL codes D31, J62)