Unemployment and wages in South Africa: A spatial approach
AbstractA large amount of recent evidence finds a negative relationship between local unemployment and wages in OECD countries, a relationship christened a ‘wage curve’. This contradicts the conventional model of the labour market in which high unemployment regions have higher wages to compensate for search and other costs. This paper discovers a wage curve in South Africa, a country with several times the typical unemployment rate of OECD countries. The wage curve elasticity in South Africa is similar to that in OECD countries (-0.1) but persists over a much larger range of unemployment rates, implying that unemployment can have a large impact on wages in South Africa. However, this wage flexibility does not extend to union wages which are well insulated from local unemployment conditions. The results here also shed light on the segmentation of the labour market based on labour immobility and on the debate about the appropriate definition of unemployment in South Africa.
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Bibliographic InfoPaper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 1999-12.
Date of creation: 1999
Date of revision:
wages; unemployment; wage curve; South Africa;
Other versions of this item:
- Geeta Kingdon & John Knight, 1999. "Unemployment and wages in South Africa: a spatial approach," Economics Series Working Papers WPS/1999-12, University of Oxford, Department of Economics.
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
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