NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Wages Equal Productivity: Fact or Fiction?

Johannes Van Biesebroeck

NBER Working Paper No. 10174
Issued in December 2003
NBER Program(s):   LS   PR

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.

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Document Object Identifier (DOI): 10.3386/w10174

Published: Van Biesebroeck, Johannes, 2011. "Wages Equal Productivity. Fact or Fiction? Evidence from Sub Saharan Africa," World Development, Elsevier, vol. 39(8), pages 1333-1346, August.

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