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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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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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Publication status: published as 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.
Handle: RePEc:nbr:nberwo:10174

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Cited by:
  1. 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.
  2. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany.
  3. Konings, Jozef & Vanormelingen, Stijn, 2009. "The Impact of Training on Productivity and Wages: Firm Level Evidence," CEPR Discussion Papers 7473, C.E.P.R. Discussion Papers.
  4. Johannes Van Biesebroeck, 2008. "Wage and Productivity Premiums in Sub-Saharan Africa," NBER Chapters, in: The Analysis of Firms and Employees: Quantitative and Qualitative Approaches, pages 345-371 National Bureau of Economic Research, Inc.
  5. Lovász, Anna & Rigó, Mariann, 2013. "Vintage effects, aging and productivity," Labour Economics, Elsevier, vol. 22(C), pages 47-60.
  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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