The Determinants of Earnings Inequalities: Panel data evidence from South Africa
AbstractIn this paper we analyse the relative importance of individual ability and labour market institutions, including public sector wage setting and trade unions, in determining earnings differences across different types of employment. To do this we use the KwaZulu-Natal Income Dynamics Study data from South Africa, which show extremely large average earnings differentials across different types of employment. Our results suggest that human capital and individual ability explain much of the earnings differentials within the private sector, including the union premium, but cannot explain the large premiums for public sector workers. We show that a public sector premium exists only for those moving into the public sector. The paper addresses the challenges of non-random attrition and measurement error bias that panel data bring. Our results show that emphasising a simple binary dichotomy between the formal and informal sector can be unhelpful in attempting to explore how the labour market functions.
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Bibliographic InfoPaper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2012-04.
Date of creation: 2012
Date of revision:
Formality; Trade unions; Public sector; Earnings; South Africa;
Other versions of this item:
- Kerr, Andrew & Teal, Francis J., 2012. "The Determinants of Earnings Inequalities: Panel Data Evidence from South Africa," IZA Discussion Papers 6534, Institute for the Study of Labor (IZA).
- Francis Teal & Andrew Kerr, 2012. "The Determinants of Earnings Inequalities: Panel data evidence from South Africa," Economics Series Working Papers WPS/2012-04, University of Oxford, Department of Economics.
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-IUE-2012-05-08 (Informal & Underground Economics)
- NEP-LAB-2012-05-08 (Labour Economics)
- NEP-LMA-2012-05-08 (Labor Markets - Supply, Demand, & Wages)
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