Is Labour Diversity Good for Firms' Productivity?

Details

Supervisors

Vandenberghe, Vincent

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité approfondie

Abstract

This work intends to investigate the effects at the firm level of diversity of the labor force in terms of gender, educational attainment and working time. The literature suggested that mixing diverse workers can increase overall productivity. Nevertheless, the empirical evidence has so far been lacking and not always addressing it structurally. To pursue the research goal, a particular approach is adopted where the diversity of labor force matters to the extent that it is associated with a difference in labor productivity by category of workers. And the purpose is to see if there is evidence of a spillover effect of any changes in firm productivity when less-productive workers are mixed with more productive workers. In answering the research question, a model is firstly specified which integrates labor diversity and labor productivity differences into firm’s production function alongside the overall level of labor and capital. Secondly, a solution is proposed to estimate a labor-diversity-enhanced production function using firm-level panel evidence coming from the balance sheet of Belgian companies. The main findings point to an absence of gain in firm productivity because of labor force diversity. Instead, when it comes to education diversity and working time diversity, the impact on firm productivity is more likely to be negative.