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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2012-04.
Date of creation: 07 Feb 2012
Date of revision:
Formality; Trade unions; Public sector; Earnings; South Africa;
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