Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/169299
Authors: 
Chatterjee, Somdeep
Year of Publication: 
2016
Citation: 
[Journal:] IZA Journal of Labor & Development [ISSN:] 2193-9020 [Volume:] 5 [Year:] 2016 [Issue:] 16 [Pages:] 1-21
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.
Subjects: 
Wage dispersion
Inequality
Firm effects
Analysis of variance
Variance decomposition
JEL: 
J31
O15
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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