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Abstract

We use a general equilibrium model to analyse the employment effects and fiscal cost of a wage subsidy in South Africa. We capture the structural characteristics of the labour market with several labour categories and substitution possibilities, linking the economy-wide results to a micro-simulation model with occupational choice probabilities to investigate the poverty and distributional consequences. The employment impact depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labour are complements in production. The impact is improved by supporting policies, but the gains remain modest if the labour market is rigid.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00220380903428456
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Article provided by Taylor and Francis Journals in its journal Journal of Development Studies.

Volume (Year): 46 (2010)
Issue (Month): 9 ()
Pages: 1481-1502

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Handle: RePEc:taf:jdevst:v:46:y:2010:i:9:p:1481-1502

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1. Geeta Kingdon & John Knight, 2001. "Unemployment in South Africa: the nature of the beast," Economics Series Working Papers WPS/2001-15, University of Oxford, Department of Economics.
   
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8. Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001. "The Beveridge Curve, Unemployment and Wages in the OECD from the 1960s to the 1990s - Preliminary Version," CEP Discussion Papers dp0502, Centre for Economic Performance, LSE.
9. Morné Oosthuizen & Haroon Bhorat, 2005. "The Post-Apartheid South African Labour Market," Working Papers 05093, University of Cape Town, Development Policy Research Unit.
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11. Go, Delfin S. & Kearney, Marna & Robinson, Sherman & Thierfelder, Karen, 2005. "An Analysis of South Africa's Value Added Tax," Policy Research Working Paper Series 3671, The World Bank.
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13. D. Boccanfuso & F. Cabral & F. Cissé & A. Diagne & L. Savard, 2003. "Pauvreté et distribution de revenus au Sénégal: une approche par la modélisation en équilibre général calculable micro-simulé," Cahiers de recherche 0333, CIRPEE.

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Cited by:

1. James A. Levinsohn & Todd Pugatch, 2011. "Prospective Analysis of a Wage Subsidy for Cape Town Youth," NBER Working Papers 17248, National Bureau of Economic Research, Inc.

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