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Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector

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  • Levy, Victor
  • Newman, John L

Abstract

Aggregate data on wages and employment may provide misleading indicators of labor market conditions. They may suggest inappropriate wage policies in the fact of the rising unemployment experienced in many developing countries during the 1980s. Such increases in unemployment are often attributed to wage rigidities. A cursory review of aggregate data for the modern sector in the Ivory Coast would support this view, suggesting that employment declined during the 1979-84 recession due to an increase in real wages. Examination of disaggregated data from two labor force censuses of the modern sector, however, shows that real wages declined for specified classes of labor. The work force was characterized by greater education, training, and experience; workers with a given level of attributes received a lower real wage by the end of the recession than before it. Despite this drop in real wages, employment in the modern sector declined. Copyright 1989 by Oxford University Press.

Suggested Citation

  • Levy, Victor & Newman, John L, 1989. "Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector," World Bank Economic Review, World Bank Group, vol. 3(1), pages 97-117, January.
  • Handle: RePEc:oup:wbecrv:v:3:y:1989:i:1:p:97-117
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    Cited by:

    1. Francis Teal, 1997. "Real wages and the demand for skilled and unskilled male labour in Ghana`s manufacturing sector: 1991-1995," Economics Series Working Papers WPS/1997-10, University of Oxford, Department of Economics.
    2. Sahn, David E. & Dorosh, Paul & Younger, Stephen, 1996. "Exchange rate, fiscal and agricultural policies in Africa: Does adjustment hurt the poor?," World Development, Elsevier, vol. 24(4), pages 719-747, April.
    3. Horton, Susan & Kanbur, Ravi & Mazumdar, Dipak, 1991. "Labor markets in an era of adjustment : an overview," Policy Research Working Paper Series 694, The World Bank.
    4. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    5. Rama,Martin G., 1998. "Wage misalignment in CFA countries: are labor market policies to blame?," Policy Research Working Paper Series 1873, The World Bank.
    6. Adeola F. Adenikinju & Olugboyega Oyeranti, 1999. "Characteristics and Behaviour of African Factor Markets and Market Institutions and Their Consequences for Economic Growth," CID Working Papers 31A, Center for International Development at Harvard University.
    7. Geeta Kingdon & Justin Sandefur & Francis Teal, 2006. "Labour Market Flexibility, Wages and Incomes in Sub‐Saharan Africa in the 1990s," African Development Review, African Development Bank, vol. 18(3), pages 392-427.

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