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Real wages and the demand for labour in Ghana's manufacturing sector


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  • Francis Teal


Real wages in Ghana have fallen substantially over the last twenty years. The question posed by this paper is whether this evidence for wage flexibility implies a competitive market clearing labour market. It is argued that it does not. There is sufficient flexibility in the production structure to ensure that a rapid growth of labour demand can be absorbed at declining average real wages while maintaining a substantial differential across workers based on firm characteristics. Indeed it is possible the differential has been increasing in the recent past. Declining real wages are not indicative of a competitive labour market, or of market clearing, in the sense that a uniform wage exists for the same quality of labour. Falling real wages are indicative of a labour market in which social security provisions are absent and investment is insufficient to raise labour demand faster than supply. A decline in wages is associated with a fall in productivity. It is possible that output is rising.

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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 1995-07.

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Date of creation: 1995
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Handle: RePEc:csa:wpaper:1995-07

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Cited by:
  1. Verner, Dorte, 1999. "Wage and productivity gaps - evidence from Ghana," Policy Research Working Paper Series, The World Bank 2168, The World Bank.
  2. Gollin, Douglas, 1995. "Do Taxes on Large Firms Impede Growth? Evidence from Ghana," Bulletins, University of Minnesota, Economic Development Center 7488, University of Minnesota, Economic Development Center.
  3. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics, Department of Economics, Williams College 172, Department of Economics, Williams College.


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