Industry wage differentials and efficiency wages: A dissenting view with South African evidence

Abstract

Does industry wage dispersion constitute evidence of either efficiency wages or rent sharing? Comparison of the industry wage premia of whites and Africans in South Africa casts doubt upon the rent extraction and the gift exchange explanations of the industry wage structure. Unions, combined with union threats, fail to explain the data. Other explanations (unobserved ability, compensating differentials, and the shirking/monitoring and turnover models) are rejected here, as they have been before. Remaining possibilities are expense preference theory and internal equity rules. Implications for future research are pointed out.