Private sector development and income dynamics: A panel study of the Tanzanian labour market
In this paper, we use a three-period panel of Tanzanian households to explore the determinants of earnings and earnings growth from 2004 to 2006.� In doing so, we draw particular attention to the role of education and to the importance of heterogeneity between more and less formal occupations.� Several important conclusions emerge.� Education is found to have a significant convex effect upon earnings levels, but to have had no significant effect upon earnings growth (indeed, there is some suggestion that education may have had a negative impact).� This suggests that recent Tanzanian growth may have reflected an 'unskill-biased technological change', providing relative reward to informal skills rather than to formal education.� Further, there are interesting insights into the age-earnings relationship: the relationship is found significantly to be concave in levels, yet age is not found significantly to have affected earnings growth.� This suggests that the concave levels relationship is driven by workers' participation decisions, rather than by a concave earnings trajectory at the level of the individual worker.� Finally, we find significant evidence of variation between formal and informal enterprises, and between sizes of enterprises within these different employment sectors.
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