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Wage and Productivity Premiums in Sub-Saharan Africa

In: The Analysis of Firms and Employees: Quantitative and Qualitative Approaches

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  • Johannes Van Biesebroeck

Abstract

Using a matched employer-employee data set of manufacturing plants in three sub-Saharan countries, I compare the marginal productivity of different categories of workers with the wages they earn. A methodological contribution is to estimate the firm level production function jointly with the individual level wage equation using a feasible GLS estimator. The additional information of individual workers leads to more precise estimates, especially of the wage premiums, and to a more accurate test. The results indicate that equality holds strongly for the most developed country in the sample (Zimbabwe), but not at all for the least developed country (Tanzania). Moreover, the breakdown in correct remuneration in the two least developed countries follows a distinct pattern. On the one hand, wage premiums exceed productivity premiums for general human capital characteristics (experience and schooling). On the other hand, salaries hardly increase for more firm-specific human capital characteristics (tenure and training), even though these have a clear productivity effect.

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This chapter was published in:

  • Stefan Bender & Julia Lane & Kathryn Shaw & Fredrik Andersson & Till von Wachter, 2008. "The Analysis of Firms and Employees: Quantitative and Qualitative Approaches," NBER Books, National Bureau of Economic Research, Inc, number bend08-1, octubre-d.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9121.

    Handle: RePEc:nbr:nberch:9121

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Johannes Van Biesebroeck, 2003. "Wages Equal Productivity: Fact or Fiction?," NBER Working Papers 10174, National Bureau of Economic Research, Inc.
    2. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: Evidence from Colombia," Economics Working Papers 763, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Muendler, Marc-Andreas, 2007. "Labor Reallocation in Response to Trade Reform," University of California at San Diego, Economics Working Paper Series qt3cm38535, Department of Economics, UC San Diego.
    4. Lorraine Dearden & Howard Reed & John Van Reenen, 2005. "The impact of training on productivity and wages : evidence from British panel data," Economic History Working Papers 779, London School of Economics and Political Science, Department of Economic History.
    5. Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Bernard Gauthier & Jan Willem Gunning & Anders Isaksson & Abena Oduro & Remco Oostendorp & Cathy Pattillo & Måns Söderbom & Francis T, 1998. "Rates of return on physical and human capital in Africa's manufacturing sector," CSAE Working Paper Series 1998-12, Centre for the Study of African Economies, University of Oxford.
    6. James Tybout, 1998. "Manufacturing Firms In Developing Countries: How Well Do They Do, And Why?," Development and Comp Systems 9805004, EconWPA.
    7. Judith K. Hellerstein & David Neumark, 2004. "Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set," NBER Working Papers 10325, National Bureau of Economic Research, Inc.
    8. Torbjørn Hægeland & Tor Jakob Klette, 1997. "Do Higher Wages Reflect Higher Productivity? Education, Gender and Experience Premiums in a Matched Plant-Worker Data Set," Discussion Papers 208, Research Department of Statistics Norway.
    9. Simon Appleton & John Hoddinott & John MacKinnon, 1996. "Education and health in sub-Saharan Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(3), pages 307-339.
    10. Fafchamps, Marcel, 1997. "Introduction: Markets in sub-saharan Africa," World Development, Elsevier, vol. 25(5), pages 733-734, May.
    11. Bruno Crépon & Nicolas Deniau & Sébastien Pérez-Duarte, 2003. "Wages, Productivity and Worker Characteristics : A French Perspective," Working Papers 2003-04, Centre de Recherche en Economie et Statistique.
    12. Knight, J B & Sabot, R H, 1987. "Educational Policy and Labour Productivity: An Output Accounting Exercise," Economic Journal, Royal Economic Society, vol. 97(385), pages 199-214, March.
    13. Van Biesebroeck, Johannes, 2005. "Firm Size Matters: Growth and Productivity Growth in African Manufacturing," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 545-83, April.
    14. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February.
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    Cited by:
    1. Johannes Van Biesebroeck, 2003. "Wages Equal Productivity: Fact or Fiction?," NBER Working Papers 10174, National Bureau of Economic Research, Inc.
    2. Cristian Bartolucci, 2010. "Understanding the Native-Immigrant Wage Gap Using Matched Employer-Employee Data. Evidence from Germany," Carlo Alberto Notebooks 150, Collegio Carlo Alberto.
    3. Fox, Louise & Oviedo, Ana Maria, 2008. "Are skills rewarded in Sub-Saharan Africa ? determinants of wages and productivity in the manufacturing sector," Policy Research Working Paper Series 4688, The World Bank.
    4. Haelermans Carla & Borghans Lex, 2011. "Wage effects of on-the-job training. A meta-analysis," ROA Research Memorandum 011, Maastricht University, Research Centre for Education and the Labour Market (ROA).
    5. Irarrazabal, Alfonso & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2009. "Heterogeneous firms or heterogeneous workers? Implications for the exporter premium and the impact of labor reallocation on productivity," CEPR Discussion Papers 7577, C.E.P.R. Discussion Papers.
    6. Pekka Ilmakunnas & Seija Ilmakunnas, 2011. "Diversity at the Workplace: Whom Does it Benefit?," De Economist, Springer, vol. 159(2), pages 223-255, June.

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