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Real Wages and Returns to Human Capital in Kenya Manufacturing firms


  • Wambugu, Anthony

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)


This paper studies how real wages and wage returns to human capital in Kenya manufacturing firms changed, using cross-section data sets from a survey conducted in 1993, 1994, 1995, and 2000. A quantile regression technique is used to examine how the impact of human capital varies across the conditional wage distribution. The study found that between 1993 and 2000, the real wage, standardized for observable human capital characteristics increased, while returns to education appear to have been stable. Returns to education are highest for workers educated to advanced levels of education at all quartiles. Moreover, workers at the extreme top of the wage distribution have the highest returns to education while workers at the extreme bottom of the wage distribution have the lowest returns to education. This suggests that at each level of education, unmeasured factors compliment schooling in wage determination. Other dimensions of human capital such as tenure in current firm and worker’s age are also significantly correlated with wages.

Suggested Citation

  • Wambugu, Anthony, 2002. "Real Wages and Returns to Human Capital in Kenya Manufacturing firms," Working Papers in Economics 75, University of Gothenburg, Department of Economics.
  • Handle: RePEc:hhs:gunwpe:0075

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    References listed on IDEAS

    1. Bennell, Paul, 1996. "Rates of return to education: Does the conventional pattern prevail in sub-Saharan Africa?," World Development, Elsevier, vol. 24(1), pages 183-199, January.
    2. Lam, David & Schoeni, Robert F, 1993. "Effects of Family Background on Earnings and Returns to Schooling: Evidence from Brazil," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 710-740, August.
    3. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
    4. Moshe Buchinsky, 1998. "Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 88-126.
    5. Colm Harmon & Hessel Oosterbeek & Ian Walker, 2000. "The returns to education : a review of evidence, issues and deficiencies in the literature," Open Access publications 10197/670, School of Economics, University College Dublin.
    6. Ritva Reinikka & Paul Collier, 2001. "Uganda's Recovery : The Role of Farms, Firms, and Government," World Bank Publications, The World Bank, number 13850.
    7. Simon Appleton & Arsene Balihuta, 1996. "Education and agricultural productivity: Evidence from Uganda," Journal of International Development, John Wiley & Sons, Ltd., vol. 8(3), pages 415-444.
    8. Damiano Kulundu Manda & Arne Bigsten & Germano Mwabu, 2005. "Trade union membership and earnings in Kenyan manufacturing firms," Applied Economics, Taylor & Francis Journals, vol. 37(15), pages 1693-1704.
    9. repec:fth:oxesaf:2000-4 is not listed on IDEAS
    10. Sharada Weir & John Knight, 2000. "Education externalities in rural Ethiopia: evidence from average and stochastic frontier production functions," CSAE Working Paper Series 2000-04, Centre for the Study of African Economies, University of Oxford.
    11. Måns Söderbom & Francis Teal, 2001. "Firm size and human capital as determinants of productivity and earnings," CSAE Working Paper Series 2001-09, Centre for the Study of African Economies, University of Oxford.
    12. Schultz, Theodore W, 1975. "The Value of the Ability to Deal with Disequilibria," Journal of Economic Literature, American Economic Association, vol. 13(3), pages 827-846, September.
    13. 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.
    14. Pritchett, Lant, 1996. "Where has all the education gone?," Policy Research Working Paper Series 1581, The World Bank.
    15. repec:fth:oxesaf:2001-9 is not listed on IDEAS
    16. Temple, Jonathan R. W., 2001. "Generalizations that aren't? Evidence on education and growth," European Economic Review, Elsevier, vol. 45(4-6), pages 905-918, May.
    17. 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.
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    Cited by:

    1. Abdoulaye Diagne & Bity Diene, 2011. "Estimating Returns to Higher Education: A Survey of Models, Methods and Empirical Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(suppl_3), pages -132, August.
    2. Giovagnoli, Paula Ines & Fiszbein, Ariel & Patrinos, Harry Anthony, 2005. "Estimating the returns to education in Argentina : 1992-2002," Policy Research Working Paper Series 3715, The World Bank.

    More about this item


    Quantile regression; returns to schooling; Kenya;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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