Labour Demand and Workforce Diversity: Evidence from Two Natural Experiments (with B. Boelmann, L. Janys, L. Santiago Wolf)

Abstract: Recent research has documented the lack of diversity in the labour market, especially in academia. Increasing diversity in the workforce is often stated as a goal and one of the challenges of modern labour markets. In this paper, we address the question whether diversity increases, even without any targeted policy interventions, when academic labour markets become tighter. We study the academic labour market for professors in Germany, a traditionally slack labour market in which males are over-represented and in which closed networks may play an important role. We explore two natural experiments that unexpectedly increased labour demand for professors. First, using newly digitized administrative data from the German Federal Statistical Office on academic staff during the German university expansion in the 1960s and 70s, we document an increase in the share of female professors from 0.6% in 1960 to about 4% in 1977. Second, we explore between-subject variation in university staff replacements in East Germany that followed the German Reunification. Using administrative microdata on university personnel, we find that nine years after the fall of the German wall professors are significantly younger in the Social Sciences (strongly affected by replacements) compared to STEM subjects (barely affected), in the East relative to the West. There is no significant change in the share of female professors, but a significant and sizeable increase in diversity of academic backgrounds, measured by the university of the final post-doctoral qualification (habilitation). Our analyses demonstrate that positive labour demand shocks can contribute to more diversity and, even without targeted policy interventions, can have the potential to break up some of the “Old-Boys' Club”.