Diversity at the Workplace: Whom Does it Benefit?

Abstract

We examine whether firms and their employees benefit from age and educational diversity. At the plant level we explain productivity with workforce characteristics. Age diversity is positively and educational diversity negatively related to total factor productivity. These conclusions are robust to using alternative estimators (fixed effects, GMM, and Olley-Pakes approach). Individual gains are evaluated by estimating earnings equations with job match fixed effects. The explanatory variables include individual demographic variables, plant-level workforce characteristics and variables that describe the individuals’ relative position in the age, education, and gender structure of the plant. Plant-level diversity does not have a significant effect on individual wages. However, being different from others in terms of age, i.e. relational demography, is positively related to wage.

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Correspondence to Pekka Ilmakunnas.

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Earlier versions of this paper have been presented at CAED conference in Budapest, EALE Conference in Tallinn, Workshop on Ageing Workforces in Louvain-la-Neuve, Annual Meeting of the Finnish Economic Association in Turku, and in a seminar at the Labour Institute for Economic Research. We are grateful to the participants and two referees for comments.

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Ilmakunnas, P., Ilmakunnas, S. Diversity at the Workplace: Whom Does it Benefit?. De Economist 159, 223–255 (2011). https://doi.org/10.1007/s10645-011-9161-x

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Keywords

  • Aging
  • Productivity
  • Workforce diversity
  • Linked employer-employee data

JEL Classification

  • D24
  • J10
  • J24
  • J31