This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Wages Equal Productivity. Fact or Fiction?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Johannes Van Biesebroeck

Additional information is available for the following registered author(s):

Abstract

If labor markets operated entirely frictionless, productivity premiums associated with different worker characteristics would equal the wage premiums earned by workers possessing those characteristics. Using matched employer-employee data from the manufacturing sector of three sub-Saharan countries, we evaluate to what extent the two premiums differ for four characteristics that are clearly related to human capital: schooling, training, experience, and tenure. Equality holds strongly and even surprisingly well for firms in Zimbabwe (the most developed country in the sample), but not at all in Tanzania (the least developed country), while results in Kenya are intermediate. Where equality fails, the pattern is for general human capital characteristics (schooling, experience) to receive a wage return that exceeds the productivity return, while the reverse applies to more firm-specific human capital characteristics (training, tenure). Schooling tends to be over-rewarded, even though large productivity gains are consistently associated with formal employee training programs. Wages tend to rise with experience, while productivity gains are mostly associated with tenure. We demonstrate the remarkable robustness of the findings controlling, among other things, for sampling errors, nonlinear effects, and non-wage benefits. Localized labor markets and imperfect substitutability of different worker-types provide a partial explanations for the estimated gap between the wage and productivity premiums.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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.

File URL: http://repec.economics.utoronto.ca/files/tecipa-294.pdf
File Format: application/pdf
File Function: Main Text
Download Restriction: no

Publisher Info
Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-294.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 43 pages
Date of creation: 29 Jun 2007
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-294

Contact details of provider:
Postal: 150 St. George Street, Toronto, Ontario
Phone: (416) 978-5283
Fax: (416) 978-6713

For technical questions regarding this item, or to correct its listing, contact: (RePEc Maintainer).

Related research
Keywords: sub-Saharan Africa; production function; labor market; human capital; market efficiency;

Other versions of this item:

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
L6 - Industrial Organization - - Industry Studies: Manufacturing

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Van Biesebroeck, Johannes, 2005. "Firm Size Matters: Growth and Productivity Growth in African Manufacturing," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 545-83, April.
  2. T. Paul Schultz, 1999. "Health and Schooling Investments in Africa," Working Papers 801, Economic Growth Center, Yale University.
    Other versions:
  3. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," NBER Working Papers 13306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Eslava, Marcela & Haltiwanger, John & Kugler, Adriana & Kugler, Maurice, 2004. "The effects of structural reforms on productivity and profitability enhancing reallocation: evidence from Colombia," Journal of Development Economics, Elsevier, vol. 75(2), pages 333-371, December. [Downloadable!] (restricted)
    Other versions:
  5. Naércio Aquino Menezes Filho & Marc Andreas Muendler, 2007. "Labor Reallocation in Response to Trade Reform," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April. [Downloadable!] (restricted)
  7. Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier. [Downloadable!] (restricted)
  8. Reardon, Thomas, 1997. "Using evidence of household income diversification to inform study of the rural nonfarm labor market in Africa," World Development, Elsevier, vol. 25(5), pages 735-747, May. [Downloadable!] (restricted)
  9. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-76, February. [Downloadable!] (restricted)
    Other versions:
  10. Bigsten, A. & Collier, P. & dercon, S. & Fafchamps, M. & Gauthier, B. & Gunning, J.W. & Isaksson, A. & Oduro, A. & Oostendorp, R. & Pattillo, C. & Soderbom, M. & Teal, F. & Zeufack, A., 1998. "Rates of Return on Physical and Human Capital in Africa's manufacturing Sector," Working Papers Series 98-12, Centre for the Study of African Economies, University of Oxford.
    Other versions:
  11. Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December. [Downloadable!] (restricted)
  12. Jones, Patricia, 2001. "Are educated workers really more productive?," Journal of Development Economics, Elsevier, vol. 64(1), pages 57-79, February. [Downloadable!] (restricted)
  13. Knight, J B & Sabot, R H, 1987. "Educational Policy and Labour Productivity: An Output Accounting Exercise," Economic Journal, Royal Economic Society, vol. 97(385), pages 199-214, March. [Downloadable!] (restricted)
  14. Johannes Van Biesebroeck, 2003. "Wages Equal Productivity: Fact or Fiction?," NBER Working Papers 10174, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Judith K. Hellerstein & David Neumark, 2004. "Production Function and Wage Equation Estimation with Heterogeneous Labor: Evidence from a New Matched Employer-Employee Data Set," NBER Working Papers 10325, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Simon Appleton & John Hoddinott & John MacKinnon, 1996. "Education and health in sub-Saharan Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(3), pages 307-339.
  17. Fafchamps, Marcel, 1997. "Introduction: Markets in sub-saharan Africa," World Development, Elsevier, vol. 25(5), pages 733-734, May. [Downloadable!] (restricted)
  18. Fox, Jeremy T. & Smeets, Valérie, 2007. "Do Input Quality and Structural Productivity Estimates Drive Measured Differences in Firm Productivity?," Working Papers 07-2, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  19. Benjamin, Dwayne, 1995. "Can unobserved land quality explain the inverse productivity relationship?," Journal of Development Economics, Elsevier, vol. 46(1), pages 51-84, February. [Downloadable!] (restricted)
  20. Schultz, T. Paul, 1988. "Education investments and returns," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 13, pages 543-630 Elsevier. [Downloadable!] (restricted)
  21. Erica L. Groshen, 1987. "The structure of the female/male wage differential: is it who you are, what you do, or where you work?," Working Paper 8708, Federal Reserve Bank of Cleveland. [Downloadable!]
  22. Dr. Peter Kenning & Hilke Plassmann, 2004. "NeuroEconomics," Experimental 0412005, EconWPA. [Downloadable!]
  23. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Blackwell Publishing, vol. 69(1), pages 245-76, January.
    Other versions:
Full references

Cited by:
(explanations, 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.)

  1. Johannes Van Biesebroeck, 2007. "Wages Equal Productivity. Fact or Fiction?," Working Papers tecipa-294, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
  2. Johannes Van Biesebroeck, 2007. "Wage and Productivity Premiums in Sub-Saharan Africa," NBER Working Papers 13306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Navon, Guy, 2009. "Human Capital Spillovers in the Workplace: Labor Diversity and Productivity," MPRA Paper 17741, University Library of Munich, Germany. [Downloadable!]
  4. 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, K.U.Leuven. [Downloadable!]
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by encouraging others to register as authors.

This page was last updated on 2009-11-21.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.