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The sources of wage growth in a developing country

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  • Ioana Marinescu
  • Margaret Triyana

Abstract

What are the sources of wage growth in developing countries? In the USA, general labor market experience is the key source of wage growth, with job seniority playing a smaller role. By contrast, in Indonesia, the 10-year return to seniority is 24 to 28 %, which is higher than the return to experience. Furthermore, we estimate a 35 % return to 10 years of tenure in the formal sector, with no significant return to tenure in the informal sector. The difference in the sources of wage growth in Indonesia versus the USA may be a reflection of Indonesia’s lower level of development. JEL codes: J3, O1 Copyright Marinescu and Triyana. 2016

Suggested Citation

  • Ioana Marinescu & Margaret Triyana, 2016. "The sources of wage growth in a developing country," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-43, December.
    • Handle: RePEc:spr:izaldv:v:5:y:2016:i:1:p:1-43:10.1186/s40175-016-0047-9
    DOI: 10.1186/s40175-016-0047-9
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    More about this item

    Keywords

    Human capital; Informal labor market; Returns to tenure;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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