Language diversity, gender inequality, and aggregate productivity in Canada

Abstract Identifying sources of barriers to occupational mobility is central to evaluating the efficiency of the labor market. In this paper, we present an augmented Roy model in which workers self‐select into occupations, subject to labor market barriers that are specific to their socio‐linguistic group. Our findings provide evidence of differences in labor market outcomes across gender and linguistic groups in Canada. We argue that these differences could be attributed to barriers to labor mobility and that the reduction of these disparities would result in higher aggregate productivity in the country. In the augmented Roy model, the frictions result in inefficient allocation of labor across occupations. The study quantifies the change in aggregate productivity that would result from reducing the friction. The elimination of the frictions increased aggregate output on average by 6.2% and 4.4% in 1991 and 2011, respectively. This finding highlights the importance of reducing language barriers and gender inequality in the labor market. We provide policy recommendations for mitigating the disparities in socioeconomic outcomes between gender and linguistic groups.