Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58828
Authors: 
Kerr, Andrew
Teal, Francis J.
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6534
Abstract: 
In this paper we analyse the relative importance of individual ability and labour market institutions, including public sector wage setting and trade unions, in determining earnings differences across different types of employment. To do this we use the KwaZulu-Natal Income Dynamics Study data from South Africa, which show extremely large average earnings differentials across different types of employment. Our results suggest that human capital and individual ability explain much of the earnings differentials within the private sector, including the union premium, but cannot explain the large premiums for public sector workers. We show that a public sector premium exists only for those moving into the public sector. The paper addresses the challenges of non-random attrition and measurement error bias that panel data bring. Our results show that emphasising a simple binary dichotomy between the formal and informal sector can be unhelpful in attempting to explore how the labour market functions.
Subjects: 
formality
trade unions
public sector
earnings
South Africa
JEL: 
J31
J51
J45
O12
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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