The Determinants of Earnings Inequalities: Panel Data Evidence from South Africa

Andrew Kerr and Francis J. Teal ()
Additional contact information
Francis J. Teal: University of Oxford

No 6534, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper we analyse the relative importance of individual ability and labour market institutions, including public sector wage setting and trade unions, in determining earnings differences across different types of employment. To do this we use the KwaZulu-Natal Income Dynamics Study data from South Africa, which show extremely large average earnings differentials across different types of employment. Our results suggest that human capital and individual ability explain much of the earnings differentials within the private sector, including the union premium, but cannot explain the large premiums for public sector workers. We show that a public sector premium exists only for those moving into the public sector. The paper addresses the challenges of non-random attrition and measurement error bias that panel data bring. Our results show that emphasising a simple binary dichotomy between the formal and informal sector can be unhelpful in attempting to explore how the labour market functions.

Keywords: earnings; public sector; trade unions; formality; South Africa (search for similar items in EconPapers)
JEL-codes: J31 J45 J51 O12 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-04
New Economics Papers: this item is included in nep-afr, nep-dev, nep-iue, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published - published as 'The Determinants of Earnings Inequalities: Panel Data Evidence from KwaZulu-Natal, South Africa' in: Journal of African Economics, 2015, 24 (4), 530- 558

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Working Paper: The Determinants of Earnings Inequalities: Panel data evidence from South Africa (2012)
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