Working Paper: NBER ID: w13306
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. 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: No keywords provided
JEL Codes: J31; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Wage premiums for general human capital characteristics (experience and schooling) (J31) | Overcompensation relative to productivity (J33) |
| Firm-specific human capital characteristics (tenure and training) (J24) | Indicating undercompensation (J33) |
| Wage premiums (J31) | Suggesting an efficient labor market (J29) |
| The equality of wage and productivity premiums (J31) | Indicating a breakdown in remuneration (J33) |
| Firms facing international competition (F23) | Indicating competitive pressures enhance labor market efficiency (J48) |