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A multiregion general equilibrium analysis of fiscal consolidation in South Africa:

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  • Chitiga, Margaret
  • Fofana, Ismael
  • Mabugu, Ramos

Abstract

A multiregion applied general equilibrium model is used to examine the financial interactions among spheres of government in the context of fiscal consolidation. The framework combines nine regional submodels interacting through the trading of goods and services and the mobility of labor and capital. The model integrates intergovernmental fiscal transfers, which play an important role in reducing the disparity in living standards between regions. The analysis demonstrates that the current intergovernmental revenue transfer system has significant inter- and intraregional equity effects, although its nationwide impact is less important. Reducing intergovernmental transfers leads to a reduction in welfare in the four regions where the net transfers were initially positive (Limpopo, Eastern Cape, KwaZulu-Natal, and North West Province). In contrast, welfare increases in the five other regions (Northern Cape, Mpumalanga, Free State, Gauteng, and the Western Cape). When transfer revenues fall and, consequently, regional and local government revenues drop, poor households are the most affected, as they depend more on public services that are essentially financed by governments. When the government's fiscal position improves, it is also poor households that benefit more from additional government expenses.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1110.

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Date of creation: 2011
Date of revision:
Handle: RePEc:fpr:ifprid:1110

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Keywords: intergovernmental transfer; multiregion applied general equilibrium; consolidation; welfare;

References

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  1. Geeta Kingdon & John Knight, 2005. "How Flexible are Wages in Response to Local Unemployment in South Africa?," Economics Series Working Papers GPRG-WPS-015, University of Oxford, Department of Economics.
  2. Nabil Annabi & John Cockburn & Bernard Decaluwé, 2006. "Functional Forms and Parametrization of CGE Models," Working Papers MPIA 2006-04, PEP-MPIA.
  3. Alberto Behar & Lawrence Edwards, 2004. "Estiimating Elasticities Of Demand And Supply For South African Manufactured Exports Using A Vector Error Correction Model," Development and Comp Systems 0409045, EconWPA.
  4. Regmi, Anita & Seale, James L., Jr., 2010. "Cross-Price Elasticities of Demand Across 114 Countries," Technical Bulletins 59870, United States Department of Agriculture, Economic Research Service.
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Cited by:
  1. Yamauchi, Futoshi & Liu, Yanyan, 2011. "Impacts of an early education intervention on students' learning achievement: Evidence from the Philippines," IFPRI discussion papers 1121, International Food Policy Research Institute (IFPRI).
  2. de Brauw, Alan & Gilligan, Daniel, 2011. "Using the regression discontinuity design with implicit partitions: The impacts of comunidades solidarias rurales on schooling in El Salvador," IFPRI discussion papers 1116, International Food Policy Research Institute (IFPRI).
  3. Zambrano, Patricia & Maldonado, Jorge H. & Mendoza, Sandra L. & Ruiz, Lorena & Fonseca, Luz Amparo & Cardona, Iván, 2011. "Women cotton farmers: Their perceptions and experiences with transgenic varieties: A case study for Colombia," IFPRI discussion papers 1118, International Food Policy Research Institute (IFPRI).
  4. Glendenning, Claire J. & Asenso-Okyere, Kwadwo & Babu, Suresh C., 2011. "Evaluation of value-added agricultural advisory services: Case study of agriclinics in Southern India," IFPRI discussion papers 1125, International Food Policy Research Institute (IFPRI).
  5. Yu, Bingxin & Nin-Pratt, Alejandro & Funes, José & Gemessa, Sinafikeh Asrat, 2011. "Cereal production and technology adoption in Ethiopia:," IFPRI discussion papers 1131, International Food Policy Research Institute (IFPRI).
  6. Morley, Samuel & Piñeiro, Valeria & Robinson, Sherman, 2011. "A dynamic computable general equilibrium model with working capital for Honduras:," IFPRI discussion papers 1130, International Food Policy Research Institute (IFPRI).
  7. Prasad, Sanjay K. & Pullabhotla, Hemant & Ganesh-Kumar, A., 2011. "Supply and demand for cereals in Nepal, 2010–2030:," IFPRI discussion papers 1120, International Food Policy Research Institute (IFPRI).
  8. Cai, Ximing & Yang, Yi-Chen E. & Zhao, Jianshi & Ringler, Claudia, 2011. "Can water allocation in the Yellow River basin be improved?: Insights from a multi-agent system model," IFPRI discussion papers 1117, International Food Policy Research Institute (IFPRI).
  9. Laborde Debucquet, David & Martin, Will & van der Mensbrugghe, Dominique, 2011. "Measuring the impacts of global trade reform with optimal aggregators of distortions:," IFPRI discussion papers 1123, International Food Policy Research Institute (IFPRI).

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