Exports, skills, and wage inequality in Kenya's manufacturing firms

Abstract

This study utilized employee–employer datasets 1993 to 1995 to investigate the presence of export wage premium and its impact on wage inequality within the Kenya's manufacturing sector. Panel estimations were conducted using the Mincerian wage regressions with fixed effects, adjusting the standard errors of estimators to accommodate potential correlation of error terms across workers in manufacturing firms. Additionally, we decompose the GINI coefficient by categories of earnings to get the marginal effects. Furthermore, the quantile regression analysis was used to show the wage distribution. The results revealed an export premium of 11 percent in the manufacturing sector upon incorporating workers' characteristics in the estimations. The export wage premium was associated with workers possessing secondary and university education. Furthermore, participating in the export sector contributes to an increase in wage inequality of 1.42 percent within the manufacturing sector. Moreover, the study found that workers with university education received export wage premium in the lower quantiles, whereas those with secondary education experienced it in the upper quantiles, albeit to a lesser extent, contributing to wage inequality.