Labor diversity and firm productivity

Pierpaolo Parrotta, Dario Pozzoli and Mariola Pytlikova

European Economic Review, 2014, vol. 66, issue C, 144-179

Abstract: Using a matched employer–employee data-set, we analyze how workforce diversity associates with the productivity of firms in Denmark, following two main econometric routes. In the first one, we estimate a standard Cobb–Douglas function, calculate the implied total factor productivity and relate the latter to diversity statistics in a second stage. This reduced-form approach allows us to identify which types of labor heterogeneity appear to descriptively matter. In the second approach, we move toward a richer production function specification, which takes different types of labor as inputs and that allows for flexible substitution patterns, and possible quality differences between types. Both methods show that workforce diversity in ethnicity is negatively associated with firm productivity. The evidence regarding diversity in education is mixed.

Keywords: Labor diversity; Substitutability; Complementarity; Communication barriers; Total factor productivity (search for similar items in EconPapers)
JEL-codes: J24 J61 J82 L20 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:66:y:2014:i:c:p:144-179

DOI: 10.1016/j.euroecorev.2013.12.002

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