On kin groups and wages in the Ghanaian labour market

A common feature of African societies is that individuals belong to kin gro ups which impose reciprocal obligations upon their members. In the modern e conomy, where large scale production is required, firms must employ multipl e kin groups. In such cases kin groups will try to favour their own members in the assignment of good jobs. We analyze the effects of kin group patron age in the modem sector. We set out a model in which kin group favouritism is shown to give rise to a wage premium for the largest kin group. We then use an unusually rich data set from Ghana to test for kin group favouritism , empirically distinguishing it from 'taste for discrimination'. We find th at in the private sector there is no evidence for kin group patronage and e arning functions (corrected for selection into the various sectors) reveal that workers are paid according to their human capital attributes. By contr ast, public sector workers are rewarded for their credentials and membershi p of the right kin group, not for their productive characteristics. The kin group premium is about 25 percent and is statistically robust to alternati ve specifications,