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Evaluating the general equilibrium effects of a wage subsidy scheme for South Africa

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  • Kalie Pauw
  • Lawrence Edwards

    ()
    (School of Economics, University of Cape Town)

Abstract

Unemployment among semi- and unskilled workers has reached severe proportions (over 50 %) and threatens the political and economic stability of the South African economy. In this paper a computable general equilibrium (CGE) model of the South African economy to assess the economy-wide impact of a wage subsidy targeted at semi- and unskilled workers. We find that employment of semi- and unskilled workers can be raised quite significantly, although the financial costs can be substantial. The targeting of the correct sectors as well as the budgetary process (deficit financed versus balanced budget) followed play an important role in the outcome.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 21.

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Length: 37 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:rza:wpaper:21

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Cited by:
  1. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, vol. 108(C), pages 169-183.
  2. Burns, Justine & Edwards, Lawrence & Pauw, Karl, 2010. "Wage subsidies to combat unemployment and poverty," IFPRI discussion papers 969, International Food Policy Research Institute (IFPRI).
  3. Go, Delfin S. & Kearney, Marna & Korman, Vijdan & Robinson, Sherman & Thierfelder, Karen, 2009. "Wage subsidy and labor market flexibility in south Africa," Policy Research Working Paper Series 4871, The World Bank.
  4. Rob Davies & James Thurlow, 2010. "Formal–Informal Economy Linkages And Unemployment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 78(4), pages 437-459, December.
  5. Kalie Pauw & Morné Oosthuizen & Carlene van der Westhuizen, 2006. "Graduate Unemployment in the Face of Skills Shortages: A Labour Market Paradox," Working Papers 06114, University of Cape Town, Development Policy Research Unit.
  6. Louise Roos, 2013. "Construction of a database for a dynamic CGE model for South Africa," Centre of Policy Studies/IMPACT Centre Working Papers g-234, Victoria University, Centre of Policy Studies/IMPACT Centre.

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