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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Efficiency wage and supervision: theory and application to the Ivorian manufacturing sector
Authors:Azam, Jean-PaulISNI
Lesueur, Jean-YvesISNI
Periodical:Journal of African Economies
Geographic term:Ivory Coast - Côte d'Ivoire
Subjects:wage differentials
External link:https://jae.oxfordjournals.org/content/6/3/445.full.pdf
Abstract:A simple model is set up to analyse the trade-off between wage and monitoring costs in an efficiency-wage framework. The efficiency-wage model in question predicts that firms may find themselves in two different regimes, depending on whether the participation constraint is binding or not. In the unconstrained regime, the labour contracts offered by firms are such that firms trade off higher wages for lower supervision, when the latter becomes more expensive. On the contrary, when the participation constraint is binding, firms will simultaneously cut the wage rate and the level of supervision when the latter becomes more expensive. These predictions were tested on panel data of manufacturing firms in Côte d'Ivoire over the period 1983-1989. The results suggest that firms in the unprotected sectors (investment goods and intermediate goods) and in the nonfood consumption goods sector were probably in the unconstrained regime during the period of analysis, and that firms in the highly protected food and agroindustrial sector may have been in the second regime, although possible measurement errors cast some doubt on the reliability of this last result. The results for the first three sectors suggest that the participation constraint is not binding in general and that firms trade off wages and supervision. This entails that the formal sector labour market in Côte d'Ivoire is not fully competitive. Bibliogr., notes, sum.