Abstract

Using data from national level surveys, the present paper undertakes an empirical analysis of the linkage between labour productivity and real wages in Tanzania. After making tabular presentations of growth in labour productivity and real wages by industry and sector (public and private), regression analysis is undertaken to examine the factors that influence incomes. Granger causality test is applied to examine the nature of the relationship between real wages and productivity for manufacturing industries. The paper finds no clear pattern in the link between real wages and productivity. Real incomes in the private sector have registered negative growth while the opposite has been the case in the public sector. In addition to education, age, occupation, and location are found to be important determinants of income. Real wages have significant impact on productivity in the manufacturing sector, thus lending support to the efficiency wage hypothesis.

Key words: Labour, productivity, real wages.