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Wages Equal Productivity: Fact or Fiction?

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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. Under certain conditions, the wage premiums for worker characteristics should equal the productivity benefits associated with them. I find that equality holds strongly for the most developed country in the sample (Zimbabwe), but not at all for the least developed country (Tanzania). Differences between wage and productivity premiums are most pronounced for characteristics that are clearly related to human capital, such as schooling, training, experience, and tenure. Localized labor markets, imperfect substitutability of different worker-types, sampling errors, and nonlinear effects are rejected as explanation for the gap between wage and productivity effects.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10174.

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Date of creation: Dec 2003
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Handle: RePEc:nbr:nberwo:10174

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Cited by:
  1. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany.
  2. Anna Lovasz & Mariann Rigo, 2012. "Vintage Effects, Ageing and Productivity," Budapest Working Papers on the Labour Market 1203, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  3. Jozef Konings & Stijn Vanormelingen, 2009. "The Impact of Training on Productivity and Wages: Firm Level Evidence," LICOS Discussion Papers 24409, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Van Biesebroeck, Johannes, 2011. "Wages Equal Productivity. Fact or Fiction? Evidence from Sub Saharan Africa," World Development, Elsevier, vol. 39(8), pages 1333-1346, August.
  5. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," Working Papers tecipa-291, University of Toronto, Department of Economics.
  6. Angel-Urdinola, Diego F. & Haimovich, Francisco & Robayo, Monica, 2009. "Is Social Assistance Contributing to Higher Informality in Turkey?," MPRA Paper 27675, University Library of Munich, Germany.

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