Wages Equal Productivity: Fact or Fiction?

53 Pages Posted: 23 Dec 2003

See all articles by Johannes Van Biesebroeck

Johannes Van Biesebroeck

K.U.Leuven; Centre for Economic Policy Research (CEPR)

Date Written: December 2003


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.

Suggested Citation

Van Biesebroeck, Johannes, Wages Equal Productivity: Fact or Fiction? (December 2003). NBER Working Paper No. w10174. Available at SSRN: https://ssrn.com/abstract=481446

Johannes Van Biesebroeck (Contact Author)

K.U.Leuven ( email )

Naamsestraat 69
B-3000 Leuven
+3216326793 (Phone)
+3216326796 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/public/N07057/

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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