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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6534.
Length: 36 pages
Date of creation: Apr 2012
Date of revision:
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Andrew Kerr & Francis Teal, 2012. "The Determinants of Earnings Inequalities: Panel data evidence from South Africa," CSAE Working Paper Series 2012-04, Centre for the Study of African Economies, University of Oxford.
- 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-AFR-2012-05-22 (Africa)
- NEP-ALL-2012-05-22 (All new papers)
- NEP-DEV-2012-05-22 (Development)
- NEP-IUE-2012-05-22 (Informal & Underground Economics)
- NEP-LAB-2012-05-22 (Labour Economics)
- NEP-LMA-2012-05-22 (Labor Markets - Supply, Demand, & Wages)
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.:
- Paul Cichello & Gary Fields & Murray Leibbrandt, 2003. "Earnings and Employment Dynamics for Africans in Post-apartheid South Africa: A Panel Study of KwaZulu-Natal," Working Papers, University of Cape Town, Development Policy Research Unit 03077, University of Cape Town, Development Policy Research Unit.
- Jeremy R. Magruder, 2012. "High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 138-66, July.
- Zvi Griliches & Jerry A. Hausman, 1984.
"Errors in Variables in Panel Data,"
NBER Technical Working Papers
0037, National Bureau of Economic Research, Inc.
- Botelho, Fernando & Ponczek, Vladimir Pinheiro, 2007.
"Segmentation in the brazilian labor market,"
Textos para discussÃ£o
231, Escola de Economia de SÃ£o Paulo, Getulio Vargas Foundation (Brazil).
- Fernando Botelho & Vladimir Ponczek, 2006. "Segmentation In The Brazilian Labor Market," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting], ANPEC - AssociaÃ§Ã£o Nacional dos Centros de PÃ³sgraduaÃ§Ã£o em Economia [Brazilian Association of G 20, ANPEC - AssociaÃ§Ã£o Nacional dos Centros de PÃ³sgraduaÃ§Ã£o em Economia [Brazilian Association of Graduate Programs in Economics].
- Pratap, Sangeeta & Quintin, Erwan, 2006. "Are labor markets segmented in developing countries? A semiparametric approach," European Economic Review, Elsevier, Elsevier, vol. 50(7), pages 1817-1841, October.
- Haroon Bhorat & Carlene van der Westhuizen & Sumayya Goga, 2009. "Analysing Wage Formation in the South African Labour Market: The Role of Bargaining Councils," Working Papers, University of Cape Town, Development Policy Research Unit 09135, University of Cape Town, Development Policy Research Unit.
- James Heintz & Dorrit Posel, 2008. "Revisiting Informal Employment And Segmentation In The South African Labour Market," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 76(1), pages 26-44, 03.
- Paolo Falco & Andrew Kerr & Neil Rankin & Justin Sandefur & Francis Teal, 2010.
"The Returns to formality and Informality in Urban Africa,"
CSAE Working Paper Series
2010-03, Centre for the Study of African Economies, University of Oxford.
- Falco, Paolo & Kerr, Andrew & Rankin, Neil & Sandefur, Justin & Teal, Francis, 2011. "The returns to formality and informality in urban Africa," Labour Economics, Elsevier, Elsevier, vol. 18(S1), pages S23-S31.
- Francis Teal & Justin Sandefur, 2010. "The Returns to Formality and Informality in Urban Africa," Economics Series Working Papers CSAE WPS/2010-03, University of Oxford, Department of Economics.
- Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, Elsevier, vol. 2(2), pages 165-187, June.
- Julian May & Jorge Aguero & Michael Carter & Ian Timï¿½us, 2007. "The KwaZulu-Natal Income Dynamics Study (KIDS) third wave: methods, first findings and an agenda for future research," Development Southern Africa, Taylor & Francis Journals, Taylor & Francis Journals, vol. 24(5), pages 629-648.
- GÃ¼nther, Isabel & Launov, Andrey, 2012. "Informal employment in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 97(1), pages 88-98.
- Moll, Peter, 1996. "Compulsory Centralization of Collective Bargaining in South Africa," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 326-29, May.
- El Badaoui, Eliane & Strobl, Eric & Walsh, Frank, 2007.
"Is There an Informal Employment Wage Penalty? Evidence from South Africa,"
IZA Discussion Papers
3151, Institute for the Study of Labor (IZA).
- Eliane El Badaoui & Eric Strobl & Frank Walsh, 2008. "Is There an Informal Employment Wage Penalty? Evidence from South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 56, pages 683-710.
- Malcolm Keswell & Laura Poswell, 2004. "Returns To Education In South Africa: A Retrospective Sensitivity Analysis Of The Available Evidence," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 72(4), pages 834-860, 09.
- James J. Heckman & V. Joseph Hotz, 1986. "An Investigation of the Labor Market Earnings of Panamanian Males Evaluating the Sources of Inequality," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 507-542.
- Amar Hamoudi & Duncan Thomas, 2014. "Endogenous Co-residence and Program Incidence: South Africa’s Old Age Pension," NBER Working Papers 19929, National Bureau of Economic Research, Inc.
- repec:ldr:wpaper:92 is not listed on IDEAS
- Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2013. "Job Creation and Destruction in South Africa," SALDRU Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town 092, Southern Africa Labour and Development Research Unit, University of Cape Town.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.