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Does Labor Diversity Affect Firm Productivity?

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Author Info

  • Parrotta, Pierpaolo

    ()
    (Maastricht University)

  • Pozzoli, Dario

    ()
    (KORA - Danish Institute for Local and Regional Government Research)

  • Pytlikova, Mariola

    ()
    (Aarhus School of Business)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6973.

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Length: 31 pages
Date of creation: Oct 2012
Date of revision:
Publication status: published in European Economic Review, Volume 66, February 2014, Pages 144–179.
Handle: RePEc:iza:izadps:dp6973

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Keywords: skill complementarity; communication barriers; total factor productivity; labor diversity;

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References

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