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Does Labor Diversity affect Firm Productivity?

  • 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))

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.

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Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2011022.

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Date of creation: Dec 2011
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Handle: RePEc:nor:wpaper:2011022
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