Firm-level determinants of earnings in the formal sector of the South African labour market
Labour market analysis in the South African context provides a relatively robust understanding of the individual characteristics that influence wage differentials across workers (i.e. supply-side characteristics), but provides relatively little insight into the firm-level characteristics influencing these differentials (i.e. demand-side characteristics). This is largely due to the relative paucity of firm-level data in South Africa. Therefore, the availability of micro firm-level data derived from anonymous corporate and individual tax data, presents an opportunity to explore this relatively uncharted and important territory in the South Africa labour market. Therefore, this paper examines the firm-level (demand-side) characteristics that explain wage differentials across formal private sector workers in South Africa. Using the FEiLSDVj method, we measure the relative contribution of firm (demand-side) and individual (supply-side) characteristics in explaining wage formulation in the South African formal sector labour market, which advances the existing literature by including a developing country case. Consistent with results for the French and Austrian labour markets, approximately 61 per cent of wage variance is due to individual effects, while at least 13 per cent is due to firm-level effects. Overall, our results suggest that firms that are profitable, older, more capital-intensive, more productive, and involved in international trade pay higher wages, on average. Interestingly, and contrary to the literature, our results indicate a negative relationship between firm size and wages.
|Date of creation:||2017|
|Contact details of provider:|| Postal: Katajanokanlaituri 6B, 00160 Helsinki|
Web page: http://www.wider.unu.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gruetter, Max & Lalive, Rafael, 2009.
"The importance of firms in wage determination,"
Elsevier, vol. 16(2), pages 149-160, April.
- Max Gruetter & Rafael Lalive, "undated". "The Importance of Firms in Wage Determination," IEW - Working Papers 207, Institute for Empirical Research in Economics - University of Zurich.
- Gruetter, Max & Lalive, Rafael, 2004. "The Importance of Firms in Wage Determination," IZA Discussion Papers 1367, Institute for the Study of Labor (IZA).
- Nickell, S & Vainiomaki, J & Wadhwani, S, 1994. "Wages and Product Market Power," Economica, London School of Economics and Political Science, vol. 61(244), pages 457-473, November.
- Timothy Hinks, 2002. "Gender wage differentials and discrimination in the New South Africa," Applied Economics, Taylor & Francis Journals, vol. 34(16), pages 2043-2052.
- Cerejeira, João & Guimarães, Paulo, 2012. "The price of unobservables and the employer-size wage premium," Economics Letters, Elsevier, vol. 117(3), pages 878-880.
- Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
- Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
- Thorsten Schank & Claus Schnabel & Joachim Wagner, 2016. "Do Exporters Really Pay Higher Wages? First Evidence from German Linked Employer–Employee Data," World Scientific Book Chapters,in: Microeconometrics of International Trade, chapter 5, pages 177-213 World Scientific Publishing Co. Pte. Ltd..
- Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
- Thorsten Schank & Claus Schnabel & Joachim Wagner, 2006. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Working Paper Series in Economics 28, University of Lüneburg, Institute of Economics.
- Timothy Dunne & Lucia Foster & John Haltiwanger & Kenneth R. Troske, 2004. "Wage and Productivity Dispersion in United States Manufacturing: The Role of Computer Investment," Journal of Labor Economics, University of Chicago Press, vol. 22(2), pages 397-430, April.
- Zhang, Jun & Liu, Xiaofeng, 2013. "The evolving pattern of the wage–labor productivity nexus in China: Evidence from manufacturing firm-level data," Economic Systems, Elsevier, vol. 37(3), pages 354-368.
- Kenneth R. Troske, 1999. "Evidence On The Employer Size-Wage Premium From Worker-Establishment Matched Data," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 15-26, February.
- Kenneth R Troske, 1994. "Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data," Working Papers 94-10, Center for Economic Studies, U.S. Census Bureau.
- Kenneth R. Troske, 1998. "Evidence on the Employer Size-Wage Premium From Worker-Establishment Matched Data," Labor and Demography 9807001, EconWPA.
- Andrew Kerr, 2016. "Job flows, worker flows, and churning in South Africa," WIDER Working Paper Series 037, World Institute for Development Economic Research (UNU-WIDER).
- Casale, Daniela & Posel, Dorrit, 2011. "English language proficiency and earnings in a developing country: The case of South Africa," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 385-393, August.
- Clive Belfield & Xiangdong Wei, 2004. "Employer size-wage effects: evidence from matched employer-employee survey data in the UK," Applied Economics, Taylor & Francis Journals, vol. 36(3), pages 185-193.
- Thierry Lallemand & Robert Plasman & FranÃ§ois Rycx, 2007. "The establishment-size wage premium: evidence from European countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(5), pages 427-451, December.
- Thierry Lallemand & Robert Plasman & François Rycx, 2005. "The establishment-size wage premium: evidence from European countries," DULBEA Working Papers 05-07.RS, ULB -- Universite Libre de Bruxelles.
- Thierry Lallemand & Robert Plasman & François Rycx, 2007. "The establishment-size wage premium: evidence from European countries," ULB Institutional Repository 2013/8735, ULB -- Universite Libre de Bruxelles.
- Lallemand, Thierry & Plasman, Robert & Rycx, Francois, 2005. "The Establishment-Size Wage Premium: Evidence from European Countries," IZA Discussion Papers 1569, Institute for the Study of Labor (IZA).
- Lawrence Edwards & Marco Sanfilippo & Asha Sundaram, 2016. "Importing and firm performance New evidence from South Africa," WIDER Working Paper Series 039, World Institute for Development Economic Research (UNU-WIDER).
- Ana Ferrer & StÃ©phanie Lluis, 2008. "Should Workers Care about Firm Size?," ILR Review, Cornell University, ILR School, vol. 62(1), pages 104-125, October.
- Ana Ferrer & Stephanie Lluis, "undated". "Should Workers Care About Firm Size?," Working Papers 0204, Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus).
- Roberto Pedace, 2010. "Firm Size-Wage Premiums: Using Employer Data to Unravel the Mystery," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 44(1), pages 163-182, March.
- Thomas Cornelissen, 2008. "The Stata command felsdvreg to fit a linear model with two high-dimensional fixed effects," Stata Journal, StataCorp LP, vol. 8(2), pages 170-189, June.
- Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
- H. Bhorat & J. Hodge, 1999. "Decomposing Shifts in Labour Demand in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 67(3), pages 155-168, September.
- Rene Morissette, 1993. "Canadian Jobs and Firm Size: Do Smaller Firms Pay Less?," Canadian Journal of Economics, Canadian Economics Association, vol. 26(1), pages 159-174, February.
- John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers 2002-06, Center for Economic Studies, U.S. Census Bureau.
- Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
- Malcolm Keswell & Laura Poswell, 2004. "Returns To Education In South Africa: A Retrospective Sensitivity Analysis Of The Available Evidence," South African Journal of Economics, Economic Society of South Africa, vol. 72(4), pages 834-860, September.
- Dorrit Posel & Colette Muller, 2008. "Is There Evidence Of A Wage Penalty To Female Part-Time Employment In South Africa?," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 466-479, September.
- Soderbom, Mans & Teal, Francis & Wambugu, Anthony, 2005. "Unobserved heterogeneity and the relation between earnings and firm size: evidence from two developing countries," Economics Letters, Elsevier, vol. 87(2), pages 153-159, May.
- Charles Brown & James L. Medoff, 2003. "Firm Age and Wages," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 677-698, July.
- Charles Brown & James L. Medoff, 2001. "Firm Age and Wages," NBER Working Papers 8552, National Bureau of Economic Research, Inc.
- Fredrik Heyman, 2007. "Firm Size or Firm Age? The Effect on Wages Using Matched Employer-Employee Data," LABOUR, CEIS, vol. 21(2), pages 237-263, June.
- Johannes Fedderke & Nonso Obikili & Nicola Viegi, 2016. "Markups and concentration in South African manufacturing sectors An analysis with administrative data," WIDER Working Paper Series 040, World Institute for Development Economic Research (UNU-WIDER).
- Allanson, Paul & Atkins, Jonathan P & Hinks, Timothy, 2002. "No End to the Racial Wage Hierarchy in South Africa?," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 442-459, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:wp2017-25. 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: (Mauricio Roa Grisales)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 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.