The role of the firm in worker wage dispersion: an analysis of the Ghanaian manufacturing sector

Somdeep Chatterjee

IZA Journal of Labor & Development, 2016, vol. 5, issue 1, 1-16

Abstract: Abstract This paper uses a linked employer-employee dataset from the Ghanaian manufacturing sector to analyze earnings dispersion in Ghana from 1992 to 2003, a period post extensive economic reforms. I find that variance of earnings increased from 1992 to 1998 and decreased thereafter, resembling an inverted u-shaped relationship. I use analysis of variance and variance decomposition approaches to understand the underlying factors that led to such a pattern in earnings inequality. I find that between-firm factors explain this pattern more than within-firm factors. I also find that the mean earnings gap between workers above and below the 90th percentile of income distribution can explain the majority of the initial surge in inequality (61 %) but only explains a very small fraction of the eventual decline (9 %). I run OLS regressions similar to Mincerian equations and decompose the variance components to find that the decline in earnings inequality is consistent with decline in variance of firm-level earnings whereas variance of predicted wage from worker characteristics have increased. I also find suggestive evidence of changing patterns of worker-firm sorting which contributes to the decline in inequality. These patterns however only hold up for private domestic firms and not for foreign-owned firms. JEL Codes: J31, O15

Keywords: Wage dispersion; Inequality; Firm effects; Analysis of variance; Variance decomposition (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1186/s40175-016-0062-x Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:izaldv:v:5:y:2016:i:1:d:10.1186_s40175-016-0062-x

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40175

DOI: 10.1186/s40175-016-0062-x

Access Statistics for this article

IZA Journal of Labor & Development is currently edited by David Lam, Hartmut Lehmann and Jackline Wahba

More articles in IZA Journal of Labor & Development from Springer, Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().