Wages And Health Worker Retention: Evidence From Public Sector Wage Reforms In Ghana

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Can governments in developing countries retain skilled health workers by raising public sector wages? We investigate this question using sudden, policy-induced wage variation in which the Government of Ghana restructured the pay scale for health workers employed by the government. We find that a 10% increase in wages decreases annual attrition from the public payroll by 1.0 percentage point (from a mean of 8 percentage points) among 20-35 year-old workers from professions that tend to migrate. As a result, the ten-year survival probability for these health workers increases from 0.43 to 0.49. The effects are concentrated among these young workers, and we do not detect effects for older workers or among categories of workers that do not tend to migrate. Given that Ghana was a major source of skilled health professional migrants during this period and that our attrition measure correlates strongly with aggregate migration, we interpret these results as evidence that wage increases in Ghana improved retention mainly through reducing international migration. (C) 2012 Elsevier B.V. All rights reserved.