Incomes in South Africa after the Fall of Apartheid

This paper examines changes in individual real incomes in South Africa between 1995 and 2000. We document substantial declines-on the order of 40%-in real incomes for both men and women. The brunt of the income decline appears to have been shouldered by the young and the non-White. We extend nonparametric methodologies to examine the role of changes in endowments, returns to these endowments and selection into and out of positive incomes as possible explanations for this income change. We argue that changes in respondent attributes are insufficient to explain this decline. For most groups, a (conservative) correction for selection into income recipiency explains some, but not all, of the income decline. For other groups, selection is a potential explanation for the income decline. Perhaps the most persuasive explanation of the evidence is substantial economic restructuring of the South African economy in which wages are not bid up to keep pace with price changes due to a differentially slack labor market.