IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1873.html
   My bibliography  Save this paper

Wage misalignment in CFA countries: are labor market policies to blame?

Author

Listed:
  • Rama,Martin G.

Abstract

It seems natural to attribute to wage rigidity (stemming from highly distortionary labor policies) the over-valuation of the CFA (Communaute Financiere Africaine) franc after the negative external shocks of the 1980s. Using a variety of data sources, the author assesses the actual rigidity of wages in CFA countries and the relationship of wage rigidity to labor policies. He shows that: a) Workers'wages are higher in CFA countries than in similar countries outside the CFA zone and higher than the earnings of similar self-employed workers within the same countries. b) Real wages are rigid (in the sense of closely following fluctuations in governmental wages and consumer prices) but there is no evidence of nominal wage rigidity. c) Labor policies may not be the source of wage misalignment and real rigidity. When compared internationally, minimum wages in CFA countries are not high enough to account for the observed wage misalignment, and their adjustment over time has been responsive to real shocks. d) Unions in the private sector seem to have been more instrumental in creating wage moderation than in creating wage drift in CFA countries. Their members usually get lower wages than similar nonunionized workers, probably because of the subordinate nature of the labor movement in CFA countries. e) Government pay policies and (possibly) limited competition in product markets are the most probable causes of wage misalignment and real wage rigidity in CFA countries.

Suggested Citation

  • Rama,Martin G., 1998. "Wage misalignment in CFA countries: are labor market policies to blame?," Policy Research Working Paper Series 1873, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1873
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/09/14/090224b082b053ef/1_0/Rendered/PDF/Wage0misalignm0t0policies0to0blame0.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, April.
    2. Levy, Victor & Newman, John L, 1989. "Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector," The World Bank Economic Review, World Bank, vol. 3(1), pages 97-117, January.
    3. Aizenman, Joshua, 1992. "Competitive Externalities and the Optimal Seigniorage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(1), pages 61-71, February.
    4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    5. repec:ilo:ilowps:293040 is not listed on IDEAS
    6. Hoddinott, John, 1996. "Wages and Unemployment in an Urban African Labour Market," Economic Journal, Royal Economic Society, vol. 106(439), pages 1610-1626, November.
    7. Karim Nashashibi & Stefania Bazzoni, 1994. "Exchange Rate Strategies and Fiscal Performance in Sub-Saharan Africa," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 76-122, March.
    8. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Do the Benefits of Exchange Rates Outweigh Their Cost? The Franc Zone in Africa," CEPR Discussion Papers 561, C.E.P.R. Discussion Papers.
    9. Shantayanan Devarajan & Dani Rodrik, 1991. "Do the Benefits of Fixed Exchange Rates Outweigh Their Costs? The Franc Zone in Africa," NBER Working Papers 3727, National Bureau of Economic Research, Inc.
    10. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    11. Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, vol. 42(7), pages 1295-1316, July.
    12. Nelson, Joan M, 1991. "Organized Labor, Politics, and Labor Market Flexibility in Developing Countries," The World Bank Research Observer, World Bank, vol. 6(1), pages 37-56, January.
    13. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    14. MacIsaac, Donna & Rama, Martin, 1997. "Determinants of Hourly Earnings in Ecuador: The Role of Labor Market Regulations," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 136-165, July.
    15. Squire, Lyn & Suthiwart-Narueput, Sethaput, 1997. "The Impact of Labor Market Regulations," The World Bank Economic Review, World Bank, vol. 11(1), pages 119-143, January.
    16. Jean-Pierre Lachaud, 1994. "Les écarts de salaires entre les secteurs public et privé en Afrique francophone : analyse comparative," Économie et Prévision, Programme National Persée, vol. 116(5), pages 89-118.
    17. Vijverberg, W. & Van Der Gaag, J., 1990. "Testing For Labor Market Duality: The Private Wage Sector In Cote D'Ivoire," Papers 66, World Bank - Living Standards Measurement.
    18. Lopez, Ramon & Riveros, Luis, 1990. "Do labor market distortions cause overvaluation and rigidity of the real exchange rate?," Policy Research Working Paper Series 485, The World Bank.
    19. repec:ilo:ilowps:294512 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Verner, Dorte, 2005. "Wage determination in Northeast Brazil," Policy Research Working Paper Series 3548, The World Bank.
    2. Günther, Isabel & Launov, Andrey, 2012. "Informal employment in developing countries," Journal of Development Economics, Elsevier, vol. 97(1), pages 88-98.
    3. Ralitza Dimova & Christophe J. Nordman & François Roubaud, 2010. "Allocation of Labor in Urban West Africa: Insights from the Pattern of Labor Supply and Skill Premiums," Review of Development Economics, Wiley Blackwell, vol. 14(1), pages 74-92, February.
    4. Nicolai Kristensen & Dorte Verner, 2008. "Labor Market Distortions in Côte d'Ivoire: Analyses of Employer‐Employee Data from the Manufacturing Sector," African Development Review, African Development Bank, vol. 20(3), pages 343-377.
    5. Houssa, Romain, 2008. "Monetary union in West Africa and asymmetric shocks: A dynamic structural factor model approach," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 319-347, February.
    6. Kaptouom, Patricia C., 2007. "The West African economic and Monetary Union: past and present of an exceptional north-south-south-integration," Discussion Papers 2007/19, Free University Berlin, School of Business & Economics.
    7. Dimova, Ralitza & Nordman, Christophe Jalil & Roubaud, François, 2008. "Allocation of Labour in Urban West Africa: Implication for Development Policies," IZA Discussion Papers 3558, Institute of Labor Economics (IZA).
    8. Bouoiyour, jamal & Kuikeu, Oscar, 2007. "Pertinence de la dévaluation du Franc CFA de janvier 1994 : Une évaluation par le taux de change réel d’équilibre. Cas de l’économie camerounaise [Relevance of the CFA France devaluation in January," MPRA Paper 31357, University Library of Munich, Germany.
    9. DJAHINI, Edém, 2015. "Les principaux déterminants de la compétitivité internationale en Afrique Sub-saharienne [The main determinants of international competitiveness in Sub-Saharan Africa]," MPRA Paper 65024, University Library of Munich, Germany, revised 16 Jun 2015.
    10. Martin Rama, 2002. "Mondialisation, inégalités et politiques de l'emploi," Revue d’économie du développement, De Boeck Université, vol. 10(1), pages 43-83.
    11. Azam, Jean-Paul & Dia, Magueye & Tsimpo, Clarence & Wodon, Quentin, 2007. "Has Growth in Senegal After the 1994 Devaluation Been Pro-Poor?," MPRA Paper 11110, University Library of Munich, Germany.
    12. Jean-Paul Azam, 2004. "Poverty and Growth in the WAEMU after the 1994 Devaluation," Journal of African Economies, Centre for the Study of African Economies, vol. 13(4), pages 536-562, December.
    13. Bouoiyour, jamal & Kuikeu, Oscar, 2007. "Pertinence de la dévaluation du Franc CFA de janvier 1994 : Une évaluation par le taux de change réel d’équilibre. Cas de l’économie camerounaise [Relevance of the CFA France devaluation in January," MPRA Paper 31357, University Library of Munich, Germany.
    14. Blunch, Niels-Hugo & Verner, Dorte, 2001. "Asymmetries in union relative wage effects in Ghanaian manufacturing - an analysis applying quantile regressions," Policy Research Working Paper Series 2570, The World Bank.
    15. Blunch, Niels-Hugo & Verner, Dorthe, 2001. "Assymetries in Union Relative Wage Effects in Ghanian Manufacturing - An analysis Applying Quantile Regressions," CLS Working Papers 01-7, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
    16. Azam, Jean-Paul & Ris, Catherine, 2001. "Rent-sharing, hold-up, and manufacturing wages in Cote d'Ivoire," Policy Research Working Paper Series 2600, The World Bank.
    17. Decaluwe, Bernard & Dissou, Yazid & Robichaud, Véronique, 1999. "Regionalization and Labour Market Rigidities in Developing Countries: A CGE Analysis of UEMOA," Cahiers de recherche 9917, Université Laval - Département d'économique.
    18. Quinn, Michael A. & Rubb, Stephen, 2006. "Mexico's labor market: The importance of education-occupation matching on wages and productivity in developing countries," Economics of Education Review, Elsevier, vol. 25(2), pages 147-156, April.
    19. World Bank, 2004. "Senegal - Policies and Strategies for Accelerated Growth and Poverty Reduction : A Country Economic Memorandum," World Bank Publications - Reports 14716, The World Bank Group.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    2. Geeta Kingdon & Justin Sandefur & Francis Teal, 2006. "Labour Market Flexibility, Wages and Incomes in Sub‐Saharan Africa in the 1990s," African Development Review, African Development Bank, vol. 18(3), pages 392-427.
    3. Pierre, Gaëlle & Scarpetta, Stefano, 2004. "Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them?," IZA Discussion Papers 1424, Institute of Labor Economics (IZA).
    4. Tomell, Aaron & Velasco, Andrés, 1994. "Fiscal Discipline and the Choice of Exchange Rate Regime," IDB Publications (Working Papers) 1144, Inter-American Development Bank.
    5. Pierre, Gaelle & Scarpetta, Stefano, 2007. "How labor market policies can combine workers'protection with job creation : a partial review of some key issues and policy options," Social Protection Discussion Papers and Notes 41439, The World Bank.
    6. Blanchflower, David G. & Oswald, Andrew J., 2006. "The Wage Curve: An Entry Written for the New Palgrave, 2nd Edition," IZA Discussion Papers 2138, Institute of Labor Economics (IZA).
    7. Marisa Carla Bucheli Anaya & Cecilia González Rodríguez-Villamil, 2012. "An estimation of the wage curve for Uruguay," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, June.
    8. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    9. Christophe Muller & Christophe Nordman, 2004. "Which Human Capital Matters For Rich And Poor'S Wages: Evidence From Matched Worker-Firm Data From Tunisia," Working Papers. Serie AD 2004-28, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    10. Freeman, Richard B., 2010. "Labor Regulations, Unions, and Social Protection in Developing Countries," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4657-4702, Elsevier.
    11. Couharde, Cécile & Coulibaly, Issiaka & Guerreiro, David & Mignon, Valérie, 2013. "Revisiting the theory of optimum currency areas: Is the CFA franc zone sustainable?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 428-441.
    12. Mahvash S Qureshi & Mr. Charalambos G Tsangarides, 2006. "What is Fuzzy About Clustering in West Africa?," IMF Working Papers 2006/090, International Monetary Fund.
    13. César Calderón & Alberto Chong & Rodrigo O. Valdés, 2005. "Labor Market Regulations and Income Inequality: Evidence for a Panel of Countries," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.),Labor Markets and Institutions, edition 1, volume 8, chapter 7, pages 221-279, Central Bank of Chile.
    14. Toke Aidt & Zafiris Tzannatos, 2002. "Unions and Collective Bargaining : Economic Effects in a Global Environment," World Bank Publications - Books, The World Bank Group, number 15241.
    15. Azam, Jean-Paul & Ris, Catherine, 2001. "Rent-sharing, hold-up, and manufacturing wages in Cote d'Ivoire," Policy Research Working Paper Series 2600, The World Bank.
    16. repec:eee:labchp:v:3:y:1999:i:pb:p:2859-2939 is not listed on IDEAS
    17. Ipek Ilkkaracan & Raziye Selim, 2003. "The role of unemployment in wage determination: further evidence on the wage curve from Turkey," Applied Economics, Taylor & Francis Journals, vol. 35(14), pages 1589-1598.
    18. Alex Cukierman, 1993. "Central Bank Independence, Political Influence and Macroeconomic Performance: a Survey of Recent Development," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 271-292.
    19. De Santis, Roberto A., 1998. "The impact of a Customs Union with the EU on internal migration in Turkey under the two alternative Harris-Todaro and wage curve settings," Kiel Working Papers 867, Kiel Institute for the World Economy (IfW Kiel).
    20. Tornell, Aaron & Velasco, Andres, 2000. "Fixed versus flexible exchange rates: Which provides more fiscal discipline?," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 399-436, April.
    21. Steven J. Matusz & David G. Tarr, 2017. "Adjusting To Trade Policy Reform," World Scientific Book Chapters, in: Trade Policies for Development and Transition, chapter 4, pages 77-114, World Scientific Publishing Co. Pte. Ltd..

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1873. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.