IDEAS home Printed from
   My bibliography  Save this paper

Efficiency Wage, Rent-sharing Theories and Wage Determination in the Manufacturing Sector in Nigeria


  • Ben E. Aigbokhan


The Nigerian labour market, like other sectors of the economy, witnessed dramatic changes following the introduction of the structural adjustment programmes (SAPs) in mid 1986. The labour market has a central role to play in the attainment of SAP objectives such as employment, income growth, and poverty reduction. In 1998 and 2000 the Federal Government implemented two jumbo salary increases which raised minimum salaries in the public sector. This had further implications for wages and employment in the formal sector of the economy. It then becomes necessary to understand the labour market process in the country. This study, focusing on the wage determination process, particularly in the manufacturing sector seeks to do this. Through this, it is possible to answer to the question: �Why would wages not adjust to equate labour supply to labour demand?� Drawing inspiration from the efficiency wage and related literature, the study uses data from an annual survey of manufacturing establishments conducted by the United Nations Industrial Development Organization in collaboration with the Centre for the Study of African Economies, Oxford, to analyse wage determination process in the manufacturing sector in Nigeria. Production and earning function approaches were used in the analysis. The ordinary least squares and instrumental two-stage least squares techniques were used in the analysis. Results from the production function analysis show that there is a positive and statistically significant relation between relative wage and productivity, consistent with prediction of the efficiency wage model. Estimation of further augmented production function suggests that some rent-sharing variables such as unionization are also relevant. Results from analysis of the earnings function show that earnings differentials seem to be explained mainly by human capital, as predicted by the competitive models. Efficiency wage and rent-sharing models both provide additional explanations.

Suggested Citation

  • Ben E. Aigbokhan, 2011. "Efficiency Wage, Rent-sharing Theories and Wage Determination in the Manufacturing Sector in Nigeria," Research Papers RP_222, African Economic Research Consortium.
  • Handle: RePEc:aer:rpaper:rp_222

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Handa, Sudhanshu, 2002. "Raising primary school enrolment in developing countries: The relative importance of supply and demand," Journal of Development Economics, Elsevier, vol. 69(1), pages 103-128, October.
    2. Glewwe, Paul, et al, 1995. "An Eclectic Approach to Estimating the Determinants of Achievement in Jamaican Primary Education," World Bank Economic Review, World Bank Group, vol. 9(2), pages 231-258, May.
    3. Behrman, Jere R & Knowles, James C, 1999. "Household Income and Child Schooling in Vietnam," World Bank Economic Review, World Bank Group, vol. 13(2), pages 211-256, May.
    4. Gomulka, Joanna & Stern, Nicholas, 1990. "The Employment of Married Women in the United Kingdom 1970-83," Economica, London School of Economics and Political Science, vol. 57(226), pages 171-199, May.
    5. Alderman, Harold, et al, 1996. "The Returns to Endogenous Human Capital in Pakistan's Rural Wage Labour Market," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 29-55, February.
    6. Paul Glewwe & Hanan Jacoby, 1994. "Student Achievement and Schooling Choice in Low-Income Countries: Evidence from Ghana," Journal of Human Resources, University of Wisconsin Press, vol. 29(3), pages 843-864.
    7. William E. Even & David A. Macpherson, 1993. "The Decline of Private-Sector Unionism and the Gender Wage Gap," Journal of Human Resources, University of Wisconsin Press, vol. 28(2), pages 279-296.
    8. Glick, Peter & Sahn, David E., 2006. "The demand for primary schooling in Madagascar: Price, quality, and the choice between public and private providers," Journal of Development Economics, Elsevier, vol. 79(1), pages 118-145, February.
    9. Melissa Binder, 1998. "Family background, gender and schooling in Mexico," Journal of Development Studies, Taylor & Francis Journals, vol. 35(2), pages 54-71.
    10. Tansel, Aysit, 2002. "Determinants of school attainment of boys and girls in Turkey: individual, household and community factors," Economics of Education Review, Elsevier, vol. 21(5), pages 455-470, October.
    11. Tansel, A., 1993. "School Attainnment, Parental Education and Gender in Cote d'Ivoire and Ghana," Papers 692, Yale - Economic Growth Center.
    12. Sahn, David E. & Stifel, David C., 2000. "Poverty Comparisons Over Time and Across Countries in Africa," World Development, Elsevier, vol. 28(12), pages 2123-2155, December.
    13. Handa, Sudhanshu & Simler, Kenneth R. & Harrower, Sarah, 2004. "Human capital, household welfare, and children's schooling in Mozambique:," Research reports 134, International Food Policy Research Institute (IFPRI).
    14. Behrman, Jere R & Birdsall, Nancy, 1983. "The Quality of Schooling: Quantity Alone is Misleading," American Economic Review, American Economic Association, vol. 73(5), pages 928-946, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aer:rpaper:rp_222. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Steven Kinuthia). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.