Working Paper: NBER ID: w10174
Authors: Johannes Van Biesebroeck
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. Under certain conditions, the wage premiums for worker characteristics should equal the productivity benefits associated with them. I find that equality holds strongly for the most developed country in the sample (Zimbabwe), but not at all for the least developed country (Tanzania). Differences between wage and productivity premiums are most pronounced for characteristics that are clearly related to human capital, such as schooling, training, experience, and tenure. Localized labor markets, imperfect substitutability of different worker-types, sampling errors, and nonlinear effects are rejected as explanation for the gap between wage and productivity effects.
Keywords: Wages; Productivity; Labor Market; Human Capital; Economic Development
JEL Codes: J31; J41; O15; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage premiums (J31) | productivity benefits (O49) |
| wages (J31) | productivity (O49) |
| economic development (O29) | wage-productivity equality (J31) |
| human capital-related characteristics (J24) | wage and productivity premiums (J31) |
| localized labor markets (J46) | discrepancies between wage and productivity effects (J31) |
| imperfect substitutability of worker types (J29) | discrepancies between wage and productivity effects (J31) |
| sampling errors (C83) | discrepancies between wage and productivity effects (J31) |