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The heterogeneous effects of workforce diversity on productivity, wages and profits

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  • Andrea Garnero
  • François Rycx

Abstract

We estimate the impact of workforce diversity on productivity, wages and productivity-wage gaps (i.e. profits) using detailed Belgian linked employer-employee panel data. Findings, robust to a large set of covariates, specifications and econometric issues, show that educational (age) diversity is beneficial (harmful) for firm productivity and wages. The consequences of gender diversity are found to depend on the technological/knowledge environment of firms. While gender diversity generates significant gains in high-tech/knowledge intensive sectors, the opposite result is obtained in more traditional industries. Overall, findings do not point to sizeable productivity-wage gaps except for age diversity.

Suggested Citation

  • Andrea Garnero & François Rycx, 2013. "The heterogeneous effects of workforce diversity on productivity, wages and profits," Working Papers CEB 13-015, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:sol:wpaper:2013/143122
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    Citations

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    Cited by:

    1. Jozef Konings & Luca Marcolin, 2014. "Do wages reflect labor productivity? The case of Belgian regions," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-21, December.
    2. Rycx, Francois & Saks, Yves & Tojerow, Ilan, 2016. "Misalignment of Productivity and Wages across Regions? Evidence from Belgian Matched Panel Data," IZA Discussion Papers 10336, Institute of Labor Economics (IZA).
    3. Andrea Garnero, 2015. "Workforce diversity, productivity and wages in France: the role of managers vs. the proprietary structure of the firm," Working Papers CEB 15-039, ULB -- Universite Libre de Bruxelles.
    4. Nils Grashof, 2020. "Sinking or swimming in the cluster labour pool? A firm-specific analysis of the effect of specialized labour," Jena Economic Research Papers 2020-006, Friedrich-Schiller-University Jena.
    5. Bryson, Alex & Forth, John & Gray, Helen & Stokes, Lucy, 2019. "Does Employing Older Workers Affect Workplace Performance?," IZA Discussion Papers 12598, Institute of Labor Economics (IZA).
    6. Hirsch, Boris & Jahn, Elke J. & Zwick, Thomas, 2019. "Birds, Birds, Birds: Co-Worker Similarity, Workplace Diversity, and Voluntary Turnover," IZA Discussion Papers 12333, Institute of Labor Economics (IZA).
    7. Thomas Bolli & Filippo Pusterla, 2018. "Komplementarität zwischen verschiedenen Bildungskategorien bei der Bestimmung der Unternehmensproduktivität," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 12(4), pages 26-36, December.
    8. Marc Gürtler & Oliver Gürtler, 2015. "The Optimality of Heterogeneous Tournaments," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 1007-1042.
    9. Beaurain, Guillaume & Masclet, David, 2016. "Does affirmative action reduce gender discrimination and enhance efficiency? New experimental evidence," European Economic Review, Elsevier, vol. 90(C), pages 350-362.
    10. John S. Heywood & Uwe Jirjahn, 2015. "The German Labor Market for Older Workers in Comparative Perspective," Research Papers in Economics 2015-02, University of Trier, Department of Economics.
    11. Elena Grinza & Stephan Kampelmann & François Rycx, 2020. "L’union fait la force? Evidence for wage discrimination in firms with high diversity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(2), pages 181-211, June.
    12. Filbeck, Greg & Foster, Benjamin & Preece, Dianna & Zhao, Xin, 2017. "Does diversity improve profits and shareholder returns? Evidence from top rated companies for diversity by DiversityInc," Advances in accounting, Elsevier, vol. 37(C), pages 94-102.
    13. Vedpal Arya & S. G. Deshmukh & Naresh Bhatnagar, 2019. "Product quality in an inclusive manufacturing system: some considerations," Journal of Intelligent Manufacturing, Springer, vol. 30(8), pages 2871-2884, December.
    14. Romina Giuliano & Stephan Kampelmann & Benoît Mahy & François Rycx, 2017. "Short Notice, Big Difference? The Effect of Temporary Employment on Firm Competitiveness across Sectors," British Journal of Industrial Relations, London School of Economics, vol. 55(2), pages 421-449, June.
    15. Parrotta, Pierpaolo & Pozzoli, Dario & Pytlikova, Mariola, 2014. "Labor diversity and firm productivity," European Economic Review, Elsevier, vol. 66(C), pages 144-179.
    16. Vincent Vandenberghe, 2015. "Is Workforce Diversity Good for Efficiency?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2015015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    20. Lone Engbo Christiansen & Huidan Huidan Lin & Joana Pereira & Petia Topalova & Rima Turk, 2016. "Gender Diversity in Senior Positions and Firm Performance; Evidence from Europe," IMF Working Papers 16/50, International Monetary Fund.
    21. International Monetary Fund, 2016. "Italy; Selected Issues," IMF Staff Country Reports 16/223, International Monetary Fund.
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    23. Avner Ben-Ner & John-Gabriel Licht & Jin Park, 2017. "Bifurcated Effects of Place-of-Origin Diversity on Individual and Team Performance: Evidence from Ten Seasons of German Soccer," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 56(4), pages 555-604, October.

    More about this item

    Keywords

    Labour diversity; productivity; wages; linked panel data; GMM;

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

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