Wages and Labour Productivity in African Manufacturing

Abstract We examine the relationship between labour productivity and wages using a sample of manufacturing firms in 39 African countries. The analysis is based on the World Bank's enterprise survey data. Controlling for regressor endogeneity and country fixed effects, our main finding is that wages reflect labour productivity and worker skills. In addition, the adoption of management quality standards, foreign ownership, and location in the capital city are all positively associated with wages. Female workers and adverse business environments characterized by electricity outages and bribery are negatively associated with wages. These findings are robust to inclusion of control variables, alternative measures of labour productivity, and exclusion of firms located in upper middle income countries and North Africa.