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Determinants of the demand for regular farm labour in South Africa, 1960-2002

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  • Sparrow, G.N.
  • Ortmann, Gerald F.
  • Lyne, Michael C.
  • Darroch, Mark A.G.
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    Abstract

    This paper estimates long-run price (wage) elasticities of demand for regular farm labour in South Africa using both Ordinary Least Squares (OLS) regression and a Two-stage Least Squares (2SLS) simultaneous-equation model for the period 1960-2002. Both models include a piecewise interactive slope dummy variable with 1991 as the threshold year to reflect South African (SA) commercial farmers’ expectations that farm labour costs would increase as new labour legislation was introduced from the early 1990s onwards. The long-run price (wage) elasticity of demand for regular farm labour in South Africa during 1960-1990 was estimated as -0.25 for OLS and -0.23 for 2SLS regression, respectively. For the period 1991-2002, this elasticity estimate rose to -1.32 and -1.34 for OLS and 2SLS regression, respectively. These results suggest that a marked structural decline in the demand for regular labour has occurred since 1991 that raises questions about the appropriateness of labour laws and minimum wage legislation that have increased the cost of regular farm labour in South Africa.

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    File URL: http://purl.umn.edu/6777
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    Bibliographic Info

    Article provided by Agricultural Economics Association of South Africa (AEASA) in its journal Agrekon.

    Volume (Year): 47 (2008)
    Issue (Month): 1 (March)
    Pages:

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    Handle: RePEc:ags:agreko:6777

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    Web page: http://www.aeasa.org.za/
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    Related research

    Keywords: Regular farm labour; SA agriculture; price (wage) elasticities of demand; Farm Management; Labor and Human Capital;

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    1. Jeremy Wakeford, 2004. "The productivity-wage relationship in South Africa: an empirical investigation," Development Southern Africa, Taylor & Francis Journals, vol. 21(1), pages 109-132.
    2. Alberto Behar, 2008. "Does training benefit those who do not get any? Elasticities of complementarity and factor price in South Africa," Working Papers 73, Economic Research Southern Africa.
    3. Charlotte Toit & Reneéa Koekemoer, 2003. "A Labour Model For South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(1), pages 49-76, 03.
    4. Haroon Bhorat & Paul Lundall, 2004. "Employment, Wages And Skills Development: Firm-Specific Effects - Evidence From A Firm Survey In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 72(5), pages 1023-1056, December.
    5. Dipak Mazumdar & Dirk van Seventer, 2002. "A Decomposition of Growth of the Real Wage Rate for South Africa: 1970-2000," Working Papers 02063, University of Cape Town, Development Policy Research Unit.
    6. Alberto Behar, 2004. "Estimates of labour demand elasticities and elasticities of substitution using firm-level manufacturing data," SALDRU/CSSR Working Papers 098, Southern Africa Labour and Development Research Unit, University of Cape Town.
    7. JW Fedderke & Martine Mariotti, 2002. "Changing Labour Market Conditions In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 830-864, 06.
    8. Beatrice Conradie, 2004. "Wages and wage elasticities for wine and table grapes in South Africa," SALDRU/CSSR Working Papers 090, Southern Africa Labour and Development Research Unit, University of Cape Town.
    9. H. Bhorat & J. Hodge, 1999. "Decomposing Shifts in Labour Demand in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 67(3), pages 155-168, 09.
    10. Dipak Mazumdar & Dirk Ernst Seventer, 2002. "A Decomposition Of Growth Of The Real Wage Rate For South Africa: 1970-2000," South African Journal of Economics, Economic Society of South Africa, vol. 70(6), pages 1076-1102, 09.
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