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The Sources of Wage Growth in a Developing Country

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  • Marinescu, Ioana E.

    (University of Pennsylvania)

  • Triyana, Margaret

    (Nanyang Technological University, Singapore)

Abstract

What are the sources of wage growth in developing countries? In the US, general labor market experience is the key source of wage growth, with job seniority playing a smaller role. By contrast, in Indonesia, the 10-year return to seniority is 24 to 29%, which is higher than the return to experience. Furthermore, we estimate a 35% return to ten years of tenure in the formal sector, with no significant return to tenure in the informal sector. The difference in the sources of wage growth in Indonesia versus the US may be a reflection of Indonesia's lower level of development.

Suggested Citation

  • Marinescu, Ioana E. & Triyana, Margaret, 2015. "The Sources of Wage Growth in a Developing Country," IZA Discussion Papers 9066, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9066
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    1. Nezih Guner & Alessandro Ruggieri, 2021. "Misallocation and inequality," Discussion Papers 2021/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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    More about this item

    Keywords

    experience; formality; informality; wages; tenure;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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