Production, Inequality and Poverty linkages in South Africa
AbstractThe Kuznets inequality-development hypothesis can be tested with time-series data rather than the cross-section analyses found in earlier literature. Single-country time-series analysis cannot be done without addressing endogeneity between output and inequality. South Africa has been under-researched in this area due to a lack of data. Recent data released by the Presidency of South Africa makes such analysis possible. Besides, the use of a single inequality index in such a multiracial society is likely to capture only average effects. This paper jointly estimates production, inequality (decomposed by sub-group) and poverty with 3sls using South African data. The findings suggest that production is affected negatively by between-group inequality. Credit constraints and interracial tensions are possible causes, generating significant adverse effects that stifle economic productivity. Within-group inequality enhances production, possibly due to within-group social capital. There is evidence of an inverted U-shape relationship between per capita income and between-group inequality, but a U-shaped one between per capita income and within-group inequality. However due to the effects of the active post-apartheid policies â€” which reduce between-group inequality, but increase within-group inequality â€” it is doubtful if this relationship is capturing a Kuznets process. There is a significant poverty-increasing (reducing) effect of total and between-group inequalities (output). The abjectly poor seem to suffer more from inequality than others do. Policy efforts have to focus on reducing between group inequality.
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Bibliographic InfoPaper provided by Economic Research Southern Africa in its series Working Papers with number 206.
Length: 17 pages
Date of creation: 2011
Date of revision:
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Production; income distribution; poverty; 3sls; South Africa;
Find related papers by JEL classification:
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
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- Servaas van der Berg & Ronelle Burger & Rulof Burger & Megan Louw & Derek Yu, 2005.
"Trends in poverty and inequality since the political transition,"
01/2005, Stellenbosch University, Department of Economics.
- Servaas van der Berg & Ronelle Burger & Rulof Burger & Megan Louw & Derek Yu, 2006. "Trends in Poverty and Inequality since the Political Transition," Working Papers 06104, University of Cape Town, Development Policy Research Unit.
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