off by the government. Alderman et al (1996) surveyed 506 former government workers who had been redeployed (the date of the survey was the second half of 1991) . Most of the redeployees came from the lower echelons of the civil service: 80 percent of them had held unskilled jobs. The researchers found that while 85 per cent of the retrenched workers had another job at the time of the survey their average earnings were considerably below what they had earned before. They estimate earnings functions for the redeployed, with and without corrections for selectivity bias, and concluded: "The returns to human capital do not differ before and after retrenchment; earnings simply shift down.. .For those redeployees currently working, earnings fell... on an average of their previous earnings. This, however, is a mean over a heterogeneous group.. .The few redeployees who have found work in the wage sector have fared reasonably well, but the remainder have suffered substantial declines in income, even those who are currently fully employed. For the underemployed farmers, earnings have all but disappeared." (Alderman et al, 1996) Alderman et al (1996) interpreted the difference in earnings before and after redeployment as evidence of "rent" associated with civil service employment. They write: "In both types of models, the earnings decline is captured entirely by a downward shift in the (earnings) functions intercept. While it is possible that this reflects the loss of a good job match, that interpretation is implausible when we consider that virtually all the redeployees who did not volunteer had unskilled jobs as sweepers, messengers etc. It is difficult to believe that their civil service earnings were above market rates because they had special skills that made such posts a good job match. The notion that public sector employees, especially at the lower echelons, were simply allowed above market earnings seems much more realistic." Some doubts remain about the rather strong conclusions on this point by Alderman et al. In particular as already pointed out, and as emphasized by themselves, the difference in earnings was pronounced for those who found jobs as self-employed. The literature of labor in developing countries (and elsewhere) have emphasized that the self employed are likely to show lower mean earnings than the employees ( even without under-reporting of incomes) principally because of two reasons: first, the efficiency wage mechanism establishes a bottom for wage employees, in so far as no employer would offer a wage below the threshold at which efficiency begins to decline proportionately more than the wage. No such threshold holding up the minimum wage, of course, exist for people working for themselves; second, the self-employed have expectation of earnings from their entrepreneurial initiatives particularly at a later age if and when they are established.

The point about the rental element in public sector wages would be strengthened if we have evidence about a difference in earnings between public sector employees and wage employees in the private sector-and particularly wage earners in the noncorporate or informal private sector. It is to an analysis of this topic that we now turn.

# **4. Firm Size and Wage Levels in Ghana's Manufacturing Sector**

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