Wage and Productivity Premiums in Sub-Saharan Africa

Working Papers from University of Toronto, Department of Economics

Abstract: Using a matched employer-employee data set of manufacturing plants in three sub-Saharan countries, I compare the marginal productivity of different categories of workers with the wages they earn. A methodological contribution is to estimate the firm level production function jointly with the individual level wage equation using a feasible GLS estimator. The additional information of individual workers leads to more precise estimates, especially of the wage premiums, and to a more accurate test. The results indicate that equality holds strongly for the most developed country in the sample (Zimbabwe), but not at all for the least developed country (Tanzania). Moreover, the breakdown in correct remuneration in the two least developed countries follows a distinct pattern. On the one hand, wage premiums exceed productivity premiums for general human capital characteristics (experience and schooling). On the other hand, salaries hardly increase for more firm-specific human capital characteristics (tenure and training), even though these have a clear productivity effect.

Keywords: Labor market efficiency; wage gap; human capital (search for similar items in EconPapers)
JEL-codes: J31 O12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-dev and nep-lab
Date: Written 2007-06-18
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Working Paper: Wage and Productivity Premiums in Sub-Saharan Africa (2007)
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