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How flexible are wages in response to local unemployment in South Africa?

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  • Geeta Gandhi Kingdon
  • John Knight

Abstract

It is commonly claimed that the South African labor market is unusually inflexible owing to the strength of the country's unions and the system of centralized collective bargaining. One sign of labor market inflexibility is low responsiveness of wages to local unemployment. Analyzing data from the South African Living Standards Survey, the authors find that the elasticity of wages with respect to local unemployment rates in South Africa in 1993 was about -0.1. The similarity of this elasticity to that found in other countries, including the United States and the United Kingdom, is surprising given South Africa's national unemployment rate of over 30%. The wage curve elasticity persists over a much wider range of unemployment rates in South Africa than in OECD countries, implying that unemployment in South Africa can have a large impact on wages. (Free full-text download available at http://digitalcommons.ilr.cornell.edu/ilrreview/.)

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Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 59 (2006)
Issue (Month): 3 (April)
Pages: 471-495

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Handle: RePEc:ilr:articl:v:59:y:2006:i:3:p:471-495

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  1. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  2. Blanchflower, David G & Oswald, Andrew J, 1993. " Testing for a U-Shaped Wage Curve. A Response," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(2), pages 245-48.
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    • Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. J. B. Knight, 1982. "The Nature of Unemployment in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 50(1), pages 1-7, 03.
  5. van der Meulen Rodgers, Yana & Nataraj, Sita, 1999. "Labor Market Flexibility in East Asia: Lessons from Taiwan," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 51-69, October.
  6. David G. Blanchflower, 1997. "Changes Over Time in Union Relative Wage Effects in Great Britain and the United States," NBER Working Papers 6100, National Bureau of Economic Research, Inc.
  7. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  8. Moll, Peter, 1996. "Compulsory Centralization of Collective Bargaining in South Africa," American Economic Review, American Economic Association, vol. 86(2), pages 326-29, May.
  9. Moll, Peter G, 1996. "The Collapse of Primary Schooling Returns in South Africa 1960-90," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 185-209, February.
  10. Anne Case & Angus Deaton, 1999. "School Inputs And Educational Outcomes In South Africa," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 1047-1084, August.
  11. Pencavel, John, 1994. "British Unemployment: Letter from America," Economic Journal, Royal Economic Society, vol. 104(424), pages 621-32, May.
  12. Carruth, Alan & Oswald, Andrew, 1987. "Wage Inflexibility in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 59-78, February.
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Cited by:
  1. PF Blaauw & WF Krugell, 2012. "Micro-evidence on day labourers and the thickness of labour markets in South Africa," Working Papers 282, Economic Research Southern Africa.
  2. Johannes Fedderke, 2012. "The Cost of Rigidity: The Case of the South African Labor Market," Working Papers 290, Economic Research Southern Africa.
  3. Blanchflower, David G. & Oswald, Andrew J., 2006. "The Wage Curve: An Entry Written for the New Palgrave, 2nd Edition," IZA Discussion Papers 2138, Institute for the Study of Labor (IZA).
  4. Johannes W. Fedderke & Andrew J Hill, 2006. "Industry Structure and Labour Market Flexibility in the South African Manufacturing Sector: A Time Series and Panel Data Approach," Working Papers 43, Economic Research Southern Africa.
  5. Knight, John, 2007. "China, South Africa, and the Lewis Model," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Richard B. Freeman, 2009. "Labor Regulations, Unions, and Social Protection in Developing Countries: Market distortions or Efficient Institutions?," NBER Working Papers 14789, National Bureau of Economic Research, Inc.
  7. Nicholas Nsowah-Nuamah & Francis Teal & Moses Awoonor-Williams, 2010. "Jobs, Skills and Incomes in Ghana: How was poverty halved?," CSAE Working Paper Series 2010-01, Centre for the Study of African Economies, University of Oxford.
  8. Freeman, Richard B., 2010. "Labor Regulations, Unions, and Social Protection in Developing Countries," Handbook of Development Economics, Elsevier.
  9. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
  10. Chitiga, Margaret & Fofana, Ismael & Mabugu, Ramos, 2011. "A multiregion general equilibrium analysis of fiscal consolidation in South Africa:," IFPRI discussion papers 1110, International Food Policy Research Institute (IFPRI).
  11. Francis Teal & Nicholas Nsowah-Nuamah and Moses Awoonor-Williams, 2010. "Jobs, Skills and Incomes in Ghana: How was poverty halved?," Economics Series Working Papers CSAE WPS/2010-01, University of Oxford, Department of Economics.

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