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Does Labor Diversity affect Firm Productivity?

Author

Listed:
  • Pierpaolo Parrotta

    (Aarhus University and University of Lausanne)

  • Dario Pozzoli

    (Aarhus University, Department of Economics and Centre for Research in Integration and Marginalization (CIM))

  • Mariola Pytlikova

    (Aarhus Univserity, Centre for Corporate Performance (CCP) and Centre for Research in Integration and Marginalization (CIM))

Abstract

Using a matched employer-employee data-set, we analyze how workforce diversity in cultural background, education and demographic characteristics affects 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. Hence, the negative effects, coming from communication and integration costs connected to a more culturally and demographically diverse workforce, seem to outweigh the positive effects coming from creativity and knowledge spillovers.

Suggested Citation

  • Pierpaolo Parrotta & Dario Pozzoli & Mariola Pytlikova, 2011. "Does Labor Diversity affect Firm Productivity?," Norface Discussion Paper Series 2011022, Norface Research Programme on Migration, Department of Economics, University College London.
    • Handle: RePEc:nor:wpaper:2011022
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    More about this item

    Keywords

    Labor diversity; skill complementarity; communication barriers; total factor productivity.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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