Learning & Earning in Africa: Evidence from Ghana∗

This paper investigates the sources of rising lifetime incomes in Ghana using both existing cross-section data and a new panel data set which allows us to measure earnings growth within jobs and to construct lifetime work histories for both wage employees and the selfemployed. In Ghana as elsewhere in sub-Saharan Africa the nonrural self-employed constitute the most rapidly growing part of the urban labour force. Cross-sectional estimates of Mincerian wage earning equations show a concave relationship between experience and earnings, as is found in virtually all datasets, and a strongly convex relationship between education and earnings. We establish that similar crosssection age and tenure patterns exist for both the self-employed and wage employees. We then investigate the sources of these age-earnings profiles using time spent working, rather than age, as our measure of experience and testing if the cross-section data reflect within-job earnings growth. We find evidence of substantial bias in the cross-section estimates. The implications of these biases for earnings growth of the self-employed relative to wage employees are discussed. ∗This paper draws on data collected by the Centre for the Study of African Economies, Oxford, in collaboration with the Ghana Statistical Office (GSO), Accra over a period from 2003 to 2005. The surveys have been funded in part by the Department for International Development of the UK. Work on this project was also funded by the Economic and Social Research Council of the UK as part of the Global Poverty Research Group. We are greatly indebted to numerous collaborators for enabling this data to be assembled. †School of Economic & Business Sciences, University of the Witwatersrand, South Africa ‡Centre for the Study of African Economies, Oxford University