The Urban Wage Premium in Africa

Abstract

This paper examines the size and sources of the urban wage premium in 3 African countries—Nigeria, Tanzania, and Uganda— using panel data on workers for the period 2009 to 2013. The authors ask 3 basic questions: First, is there any evidence that an urban wage premium exists in Africa? Second, what role, if any, does spatial sorting play in explaining this wage premium? Third, which demographic groups benefit the most from agglomeration effects? Their findings present new evidence on the role of cities in Africa. Specifically, they find strong evidence that an urban wage premium exists and is not explained solely by the spatial sorting of more skilled workers into African cities. However, there is considerable heterogeneity in who benefits from agglomeration effects. They find evidence that the urban wage premium is largest for workers in the primate city of each country and, in some cases, non-existent for workers in secondary cities. In addition, the urban wage premium is only found to be significant for male workers in all 3 countries studied. This paper is a part of a Global Research Program on Spatial Development of Cities, funded by the Multi Donor Trust Fund on Sustainable Urbanization of the World Bank and supported by the UK Department for International Development