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Anthony Wambugu

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Anthony Wambugu
School of Economics, University of Nairobi, Kenya

Wambugu, Anthony. "WORKER PRODUCTIVITY AND WAGES IN KENYAN MANUFACTURING SECTOR." Int. j. of Social Science and Economic Research, vol. 3, no. 1, Jan. 2018, pp. 135-152, Accessed 2018.
Wambugu, A. (2018, January). WORKER PRODUCTIVITY AND WAGES IN KENYAN MANUFACTURING SECTOR. Int. j. of Social Science and Economic Research, 3(1), 135-152. Retrieved from
Wambugu, Anthony. "WORKER PRODUCTIVITY AND WAGES IN KENYAN MANUFACTURING SECTOR." Int. j. of Social Science and Economic Research 3, no. 1 (January 2018), 135-152. Accessed , 2018.

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This paper investigated one possible source of labour market distortion in Kenya. The prediction of the efficiency wage hypothesis is tested in a production function framework applied to a panel of firms in Kenyan manufacturing industry. The results demonstrate that the relative wages of firms in this industry are positively related with value-added per worker. The results are consistent with the efficiency wage hypothesis that paying wages above the market clearing wage raises worker productivity. This provides a potential explanation of why real wages in the manufacturing sector did not decline in the study period despite the huge labour supply pressure. So, even in the absence of other sources of labour market distortion (e.g. unions and minimum wages) labour market distortion can be present due to efficiency wage considerations in firms' wage policy.