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Labor Diversity and Firm Productivity?

Author

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  • Pierpaolo Parrotta

    (Maastricht University [Maastricht])

  • Dario Pozzoli
  • Pytlikova Mariola

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.

Suggested Citation

  • Pierpaolo Parrotta & Dario Pozzoli & Pytlikova Mariola, 2014. "Labor Diversity and Firm Productivity?," Post-Print hal-01513969, HAL.
  • Handle: RePEc:hal:journl:hal-01513969
    DOI: 10.1016/j.euroecorev.2013.12.002
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01513969
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    More about this item

    Keywords

    Communication barriers; Complementarity; Substitutability; Total factor productivity; Labor diversity;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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