Labor Diversity and Firm Productivity

Pierpaolo Parrotta, Dario Pozzoli, Mariola Pytlikova

Research output: Contribution to journalJournal articleResearchpeer-review

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.
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.
LanguageEnglish
JournalEuropean Economic Review
Volume66
Pages144–179
ISSN0014-2921
DOIs
StatePublished - 2014
Externally publishedYes

Keywords

    Cite this

    Parrotta, Pierpaolo ; Pozzoli, Dario ; Pytlikova, Mariola. / Labor Diversity and Firm Productivity. In: European Economic Review. 2014 ; Vol. 66. pp. 144–179
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    Labor Diversity and Firm Productivity. / Parrotta, Pierpaolo; Pozzoli, Dario ; Pytlikova, Mariola.

    In: European Economic Review, Vol. 66, 2014, p. 144–179.

    Research output: Contribution to journalJournal articleResearchpeer-review

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    KW - Substitutability

    KW - Complementarity

    KW - Communication barriers

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