Detailed data exist from the surveys of enterprises and their workers conducted in the manufacturing sector of Ghana by the Research Program of Enterprise Development (RPED) of the World Bank. As already mentioned we have the data in three waves between 1992 and 1994. This material will be used to investigate the variation in labor earnings by size of establishment in the manufacturing sector of Ghana, since the sampled enterprises covered the entire spectrum from the micro to the very large. The topic is particularly important for assessing the extent of wage difference between the informal (small) and the formal (large) sectors in manufacturing, and the role of institutional factors in causing theses differences.

# **4.1 Analysis by Teal**

We have already referred to the work by Frances Teal on earnings function using the RPED data. His estimation of the function reproduced in Table 3.6 above, showed that, after controlling for human capital characteristics of the worker and profitability and capital-intensity of the enterprise, earnings increased by -firm size in a rather substantial way. Teal in these equations used the logarithm of firn size as the explanatory variable. The high significance of this variable showed that earnings increased with firm size a in a non-linear way. The elasticity of earnings with respect to firm size varied from 0.07 to 0.13.

It is more interesting to have an idea of the way labor earnings increase for different size groups of firms. For this, one needs to use dummies of different size groups of firms in the earnings function. In another piece of analysis Teal does just this (Teal 1994). Data for all workers for the first two waves are pooled and an earnings function is estimated with the following variables: age; highest level of education; occupation; location; industry; unionization-along with firm size dummies, and a dummy to control for the change between the two years. Teal summarizes the results of our interest as follows: _"Standardizing for skill, workers in small firms, which are those employing between 5 and 29 workers, earn 21 per cent more than workers in microfirms ie., those employing 5 or less. Medium sizedfirms, i.e. those employing 30 and 100 workers, pay an additional 14 per cent, while the category of large firms, those employing more than 100 workers pay afurther 13 per cent. The cumulative effect of these earning differences across firms is that workers in_ **_firms_** _employing more than 100 workers earn 55 per cent more than those working in micro firms.. " (Teal 1994, p. 13, using results from Table 1)._ Referring back to the topic of the last section, it should be emphasized that sate owned enterprise are generally large firms. Thus the earnings level in public enterprises, which were seen to enjoy a premium of 35 per cent or so, could be as much as 100 per cent more than in the micro enterprises ( after controlling for all the other significant factors affecting wages).

# **4.2 Analysis by Mazumdar**

Mazumdar's work (1994, 1995) on the RPED data for a number of different countries follows a different procedure. The purpose of the empirical work on the earnings data is to classify size groups of enterprises in each country which tend to show different levels of earnings. This way we seek to avoid the imposition of an arbitrary 20