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Do More Productive Firms Pay Workers More? Evidence from Egypt

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  • Caroline Krafft

    (St. Catherine University)

  • Ragui Assaad

Abstract

Theoretically, in perfectly competitive markets with full information, marginal productivity of labor and workers’ wages should be equalized across firms and wages should not be linked to the productivity of a firm. Empirically examining the relationship between wages and productivity across various types of firms can reveal important deviations from perfect competition and full information. This paper investigates the wage-productivity relationship in the case of Egypt. We find that wages are related to firm productivity, even after accounting for worker quality. The relationship between wages, productivity, and firm characteristics suggests that the association is due in part to imperfect competition and in part to the use of efficiency wages by employers.

Suggested Citation

  • Caroline Krafft & Ragui Assaad, 2018. "Do More Productive Firms Pay Workers More? Evidence from Egypt," Working Papers 1222, Economic Research Forum, revised 18 Sep 2018.
    • Handle: RePEc:erg:wpaper:1222
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    Cited by:

    1. Abeer Elshennawy & Mohammed Bouaddi, 2021. "Sources of firm-level heterogeneity in labour productivity in Egypt’s manufacturing sector," Empirical Economics, Springer, vol. 60(5), pages 2589-2612, May.

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