Openness and wage inequality in Kenya, 1964–2000

SummaryThis paper analyzes the evolution of wage inequality in Kenya during 1964–2000. Our measure of wage inequality is the ratio of wages in manufacturing to wages in agriculture, which can be seen as an indicator of sectoral wage inequality or as a proxy for skilled to unskilled wages. We find that changes in relative wages have primarily been driven by the degree of openness, while other factors such as the capital–labor ratio, educational attainment, relative labor productivity, and the ratio between agricultural and manufacturing prices had no significant effect. We conclude that international market integration has reduced wage inequality in Kenya.