Skill formation and job matching effects in wage growth: the case of manufacturing workers in Ethiopia

In this paper, I analyse production and labour market data from a random sample of manufacturing firms in Ethiopia in order to test for skill formation and job matching effects in wage growth. Based on estimated labor market experience and job seniority profiles of relative marginal productivity and relative wages, I find that both on-the-job skill formation and job matching are significant sources the growth of productivity and wages with time in the labour market. However, there is also evidence in the same data that job matching is by far the more important of the two sources: net mobility gains are at least twice the return to skill formation for workers with at most ten years of time in the labour market.