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Evaluating The General Equilibrium Effects Of A Wage Subsidy Scheme For South Africa

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  • Kalie Pauw
  • Lawrence Edwards

Abstract

Unemployment among semi- and unskilled labour has reached severe proportions (over 50%) and threatens the political and economic stability of the South African economy. In this paper a computable general equilibrium (CGE) model of the South African economy is used to assess the effectiveness of a wage subsidy in raising employment of semi- and unskilled workers. We find that employment of semi- and unskilled workers can be raised quite significantly. Further, the wage subsidy schemes compares favourably with alternative welfare grant schemes in terms of employment growth. However, the results are sensitive to the targeting of sectors and the substitutability between labour of different skill levels. Copyright (c) 2006 The Authors. Journal compilation (c) 2006 Economic Society of South Africa.

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Bibliographic Info

Article provided by Economic Society of South Africa in its journal South African Journal of Economics.

Volume (Year): 74 (2006)
Issue (Month): 3 (09)
Pages: 442-462

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Handle: RePEc:bla:sajeco:v:74:y:2006:i:3:p:442-462

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Cited by:
  1. Louise Roos, 2013. "Construction of a database for a dynamic CGE model for South Africa," Centre of Policy Studies/IMPACT Centre Working Papers g-234, Victoria University, Centre of Policy Studies/IMPACT Centre.
  2. Go, Delfin S. & Kearney, Marna & Korman, Vijdan & Robinson, Sherman & Thierfelder, Karen, 2009. "Wage subsidy and labor market flexibility in south Africa," Policy Research Working Paper Series 4871, The World Bank.
  3. Kalie Pauw & Morné Oosthuizen & Carlene van der Westhuizen, 2006. "Graduate Unemployment in the Face of Skills Shortages: A Labour Market Paradox," Working Papers, University of Cape Town, Development Policy Research Unit 06114, University of Cape Town, Development Policy Research Unit.
  4. Davies, Rob & Thurlow, James, 2009. "Formal-informal economy linkages and unemployment in South Africa:," IFPRI discussion papers 943, International Food Policy Research Institute (IFPRI).
  5. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.
  6. Burns, Justine & Edwards, Lawrence & Pauw, Karl, 2010. "Wage subsidies to combat unemployment and poverty," IFPRI discussion papers 969, International Food Policy Research Institute (IFPRI).

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