ABSTRACT
We saw in the last chapter that the size of the enterprise was an important determinant of the level of earnings, after controlling for measurable human capital factors. This result is in keeping with other studies of wage labor markets in developing countries. The positive relationship between enterprise size and wage levels has also been noted to have been a feature of labor markets in advanced industrialized countries; but the quantitative dimensions of the size related difference are altogether different in developing countries. Idson and Feaster (1990) arranged the US census of Population data into fives size groups: 1-24 workers, 25-99, 100-499, 500999, 1000 and more. The size effect of earnings for the four larger groups relative to the smallest was (in percentages) 7.9, 16.4, 19.8, 23.8 respectively. In the analysis of earnings from the RPED data set reported in the last chapter the size groups were slightly different: Micro 1-10, small 10-50, medium 50-200, large 200-500, very large 500 and more. However, even a cursory look at the magnitudes is enough to convince anyone that the wage differentials found in African countries is several times that reported for the United States. The log difference in earnings of the very large compared to the micro ranged from a low of 0.41 or 0.42 for Tanzania and Kenya to a high of 1.20 for Zimbabwe and 0.92 for Cameroon. It should also be remembered that the eamings-differences for the African countries quoted, unlike the US example, was net of human capital factors (sex, education, experience, industry and location). Similarly, very large differentials in earnings by size groups have been found in other parts of the developing world. The Bombay labor market study reported by Mazumdar (1984) found the spread of earnings from the smallest to the largest size-groups, with roughly the same type of categories, to be 0.67 for manual male workers, after controlling for the human capital differences. (Cf. also Manning for Indonesia 1979; Schaffner
for Peru 1994).57 The size-related differential has also been of markedly large magnitude in Japan during its process of industrialization (Yosuba 1976).
