The Sources of Wage Growth in a Developing Country

62 Pages Posted: 1 Jun 2015

See all articles by Ioana Elena Marinescu

Ioana Elena Marinescu

University of Pennsylvania - School of Social Policy & Practice; National Bureau of Economic Research (NBER)

Maggie Triyana

Nanyang Technological University (NTU)

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.

Keywords: experience, formality, informality, wages, tenure

JEL Classification: J31, O1

Suggested Citation

Marinescu, Ioana Elena and Triyana, Margaret, The Sources of Wage Growth in a Developing Country. IZA Discussion Paper No. 9066, Available at SSRN: https://ssrn.com/abstract=2612318 or http://dx.doi.org/10.2139/ssrn.2612318

Ioana Elena Marinescu (Contact Author)

University of Pennsylvania - School of Social Policy & Practice ( email )

3701 Locust Walk
Philadelphia, PA 19104-6214
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Margaret Triyana

Nanyang Technological University (NTU) ( email )

S3 B2-A28 Nanyang Avenue
Singapore, 639798
Singapore

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