Labor Diversity and Firm Productivity?

Pierpaolo Parrotta, Dario Pozzoli and Mariola Pytlikova

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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: Communication barriers; Complementarity; Substitutability; Total factor productivity; Labor diversity (search for similar items in EconPapers)
Date: 2014
Note: View the original document on HAL open archive server: https://hal.science/hal-01513969
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Citations: View citations in EconPapers (100)

Published in European Economic Review, 2014, 66, pp.144-179. ⟨10.1016/j.euroecorev.2013.12.002⟩

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Journal Article: Labor diversity and firm productivity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01513969

DOI: 10.1016/j.euroecorev.2013.12.002

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