Does Labor Diversity Affect Firm Productivity?

Pierpaolo Parrotta, Dario Pozzoli and Mariola Pytlikova

No 6973, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Using a matched employer-employee data-set, we analyze how workforce diversity in terms of cultural background, education and demographic characteristics affects the productivity of firms in Denmark. Implementing a structural estimation of the firms' production function (Ackerberg et al. 2006), we find that labor diversity in education significantly enhances a firm's value added. Conversely, diversity in ethnicity and demographics induces negative effects on firm productivity. Therefore, the negative effects, which are derived from the communication and integration costs associated with a more culturally and demographically diverse workforce, seem to outweigh the positive effects of creativity and knowledge spillovers.

Keywords: communication barriers; total factor productivity; skill complementarity; labor diversity (search for similar items in EconPapers)
JEL-codes: J15 J16 J24 J61 J81 L20 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2012-10
New Economics Papers: this item is included in nep-bec, nep-dem, nep-eff, nep-lab and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published - revised version published as 'Labor Diversity and Firm Productivity' in: European Economic Review, 2014, 66, 144 -179

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Related works:
Working Paper: Does Labor Diversity affect Firm Productivity? (2011)
Working Paper: Does Labor Diversity Affect Firm Productivity? (2010)
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