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Dissecting post-apartheid labour market developments: Decomposing a discrete choice model while dealing with unobservables

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  • Martin Wittenberg

Abstract

The abolition of apartheid should have improved the employment prospects of black South Africans. The reality seems to have been different, with rising unemployment rates. Disentangling the real trends from changes in measurement and sampling design has proved to be difficult. We tackle this issue by means of an new methodology for decomposing changes in a proportion. Our approach is based on a methodology presented by Lemieux for continuous variables. In particular we show how we can construct counterfactual data at the individual level controlling for unobservable effects. We show that this methodology has many attractive features when compared to other approaches available. In particular it lends itself to graphical analyses. We use this methodology to explore changes in the proportion of African men being employed, unemployed and not economically active in South Africa in the post-apartheid period. Our results suggest that changes in the characteristics of these men have made them more employable over time, but that the propensity to be employed has declined. One might say that the human and social capital of these men has improved, but that the returns on that capital have declined. The net effect has been to leave measured employment more or less static. Changes in their characteristics and in their propensity to be economically active have both worked towards increasing the participation rate. As a consequence unemployment has risen over time. The analysis confirms that there are important measurement changes between different national surveys.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 46.

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Length: 32 pages
Date of creation: Jan 2007
Date of revision:
Handle: RePEc:rza:wpaper:46

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Related research

Keywords: decomposition; discrete choice models; South Africa; employment; unemployment; participation;

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References

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  1. H. Bhorat, 1999. "The October Household Survey, Unemployment and the Informal Sector: A Note," South African Journal of Economics, Economic Society of South Africa, vol. 67(2), pages 143-146, 06.
  2. Martin Wittenberg, 2002. "Job Search In South Africa: A Nonparametric Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 70(8), pages 1163-1196, December.
  3. Taryn Dinkelman & Farah Pirouz, 2002. "Individual, Household And Regional Determinants Of Labour Force Attachment In South Africa:," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 865-891, 06.
  4. Thomas Lemieux, 2002. "Decomposing changes in wage distributions: a unified approach," Canadian Journal of Economics, Canadian Economics Association, vol. 35(4), pages 646-688, November.
  5. Haroon Bhorat, 2004. "Labour Market Challenges In The Post-Apartheid South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 72(5), pages 940-977, December.
  6. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  7. Yun, Myeong-Su, 2004. "Decomposing differences in the first moment," Economics Letters, Elsevier, vol. 82(2), pages 275-280, February.
  8. Haroon Bhorat, 2003. "The Post-Apartheid Challenge: Labour Demand Trends in the South African Labour Market, 1995-1999," Working Papers 03082, University of Cape Town, Development Policy Research Unit.
  9. Klasen, Stephan & Woolard, Ingrid, 2000. "Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa," IZA Discussion Papers 237, Institute for the Study of Labor (IZA).
  10. Lundberg, Shelly, 1985. "The Added Worker Effect," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 11-37, January.
  11. Even, William E. & Macpherson, David A., 1990. "Plant size and the decline of unionism," Economics Letters, Elsevier, vol. 32(4), pages 393-398, April.
  12. Borooah, Vani & Iyer, Sriya, 2005. "The Decomposition of Inter-Group Differences in a Logit Model: Extending the Oaxaca-Blinder Approach with an Application to School Enrolment in India," MPRA Paper 19418, University Library of Munich, Germany.
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Cited by:
  1. Steve F Koch & Ssekabira Ntege, 2008. "Returns to Schooling: Skills Accumulation or Information Revelation?," Working Papers 87, Economic Research Southern Africa.

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