Let me inform you of the following research seminar.

Date: April 21 (Friday), 2023
Time: 5:15PM-6:45PM
Venue: 11th Floor, Bldg.No.2 Meeting Room B & ZOOM (HyFlex)
Speaker: Michele Baggio (University of Connecticut)　
Organizer: Yuki Higuchi
Language: English

Title:
Racial Diversity and Team Performance: Evidence from the American Offshore Whaling Industry

Abstract:
In this paper, we contribute to the literature on diversity and team performance by studying the American Offshore Whaling Industry during the period between 1807 and 1912. From colonial settlements into the twentieth century, whaling was an important industry in America, thanks to the process of industrialization and urbanization that raised the demand for oil used for lubrication and illumination and for baleen used in the production of various consumer products. Operations on the vessel required a significant amount of teamwork and cooperation by the crew, which consisted of a combination of high and low skill workers with well identified roles and ranks. In this context, we document the existence of a nonlinear effect of racial diversity on team productivity, where teams are represented by the crew operating onboard of whaling voyages. We do this by estimating the effect of racial diversity on the value of the output captured during the voyage as well as on productivity. The presence of these multiple sources of diversity allows us moreover to uncover the transmission channels responsible for the nonlinear shape of the estimated relationship.

The history of the American whaling industry offers an ideal setting to examine the impact of racial diversity on team productivity by providing appropriate data and unique advantages for identification. A significant benefit from focusing on this industry is the availability of extremely rich data on the crew and the production process of whaling voyages. Crews were multiracial and multiethnic, composed of individuals from various states, recent immigrants, and various other nationalities that joined on the whaling routes. Customs records include the crew lists and detailed data on each voyage, including crew characteristics, departure and arrival dates, vessel characteristics, and output. Our dataset includes about 4,400 voyages and 113,000 crewmembers.

To conduct our empirical analysis, we draw on a large number of data sources. Customs records include a visual description of each crew member (skin complexion, hair, and eye color) recorded for identification at customs, which can be used as proxy for race. We combined this information with data from the Seamen's Protection Certificate Database, the U.S. Federal Census schedules, and various sources on the names of native Americans employed in the whaling industry, to determine the race of each crew member. Based on this information, for each voyage we calculated the fractions of members in various racial categories to construct indices of fractionalization, which denotes the racial diversity of the crew, and estimate its effect on the total revenue and productivity.

In our empirical specification crew diversity affects productivity in a quadratic form. We exploit the richness of the data by including in the analysis various voyage characteristics and a number of fixed effects to address omitted factors. In particular, as the performance of the team depends on the way is managed, especially with regards on the implications of racial diversity, we include a fixed effect for the captain. In the whaling industry, the role of the captain and his ability in managing the crew and hunting whales was vital to the success of the voyage.

With this strategy we provide evidence for the existence of a U-shaped relationship between racial diversity and team productivity. We find that while an initial increase in diversity induces a sharp decline in the value of output, higher levels of racial heterogeneity yield substantial gains. Overall, our results indicate that racial diversity generates very modest economic costs. That is, the elasticity calculated at the median of the fractionalization index implies that a 10 percent rise in diversity decreases revenue by about 0.2 percent. These results are precisely estimated and robust across different specifications and robustness checks. Even though endogeneity concerns are minimal in the case of whaling crews, we cannot completely exclude the possibility of the racial composition of whaling crews being chosen in order to improve productivity. Because of this, we also address potential endogeneity issues arising from possible selection of the racial composition of the crew. To that end, we follow the literature  by instrumenting racial diversity with the pre-existing regional diversity at the home port measured with a time lag. The results of the 2SLS model confirm the robustness of our OLS findings. The 2SLS estimates show that the overall effect of diversity is null, if not slightly positive. Moreover, results show that at the two ends of the distribution diversity’s net effect on team productivity is lower for homogenous crews than for highly diverse ones, which indicates an overall positive advantage to greater diversity.

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