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Does training benefit those who do not get any? Elasticities of complementarity and factor price in South Africa

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  • Alberto Behar

Abstract

Commentators claim a shortage of skills, particularly artisanal labour, in South Africa is constraining output and that a rise in skill supply would benefit less skilled occupations. This assumes/implies skilled and unskilled labour are q-complements. This paper estimates Hicks Elasticities of Complementarity and elasticities of factor price. Aggregate estimates suggest more skilled (white collar) labour complements less skilled (blue collar) labour, so a rise in skill supply would lead to a rise in demand for less skilled labour. Disaggregated results show skilled/artisanal and unskilled labour are complements while semi-skilled and unskilled labour are substitutes. These results allow for imperfectly elastic product demand, rigid wages, inference on highly non-linear elasticities and a variety of estimation approaches.

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Bibliographic Info

Paper provided by Economic Research Southern Africa in its series Working Papers with number 73.

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Date of creation: 2008
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Handle: RePEc:rza:wpaper:73

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  1. Haroon Bhorat & Paul Lundall, 2002. "Employment, Wages and Skills Development: Firm Specific Effects - Evidence from Two Firm Surveys in South Africa," Working Papers 02068, University of Cape Town, Development Policy Research Unit.
  2. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  3. Stern, David I, 2008. "Elasticities of Substitution and Complementarity," MPRA Paper 12454, University Library of Munich, Germany.
  4. Acemoglu, Daron, 1997. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," CEPR Discussion Papers 1707, C.E.P.R. Discussion Papers.
  5. Johnson, George E, 1980. "The Theory of Labour Market Intervention," Economica, London School of Economics and Political Science, vol. 47(187), pages 309-29, August.
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  7. Bergstrom, Villy & Panas, Epaminondas E, 1992. "How Robust Is the Capital-Skill Complementarity Hypothesis?," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 540-46, August.
  8. Alberto Behar & Lawrence Edwards, 2004. "Estimating elasticities of demand and supply for South African manufactured exports using a vector error correction model," CSAE Working Paper Series 2004-04, Centre for the Study of African Economies, University of Oxford.
  9. Sato, Ryuzo & Koizumi, Tetsunori, 1973. "On the Elasticities of Substitution and Complementarity," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 44-56, March.
  10. Kitty Mak, 2000. "The Contribution of Canadian Education to Industrial Production," Education Economics, Taylor & Francis Journals, vol. 8(3), pages 249-257.
  11. Daron Acemoglu, 1999. "Patterns of Skill Premia," NBER Working Papers 7018, National Bureau of Economic Research, Inc.
  12. Alberto Behar, 2004. "Estimates of labour demand elasticities and elasticities of substitution using firm-level manufacturing data," SALDRU/CSSR Working Papers 098, Southern Africa Labour and Development Research Unit, University of Cape Town.
  13. Blackorby, Charles & Primont, Daniel & Russell, R. Robert, 1977. "On testing separability restrictions with flexible functional forms," Journal of Econometrics, Elsevier, vol. 5(2), pages 195-209, March.
  14. Griliches, Zvi, 1969. "Capital-Skill Complementarity," The Review of Economics and Statistics, MIT Press, vol. 51(4), pages 465-68, November.
  15. Binswanger, Hans P, 1974. "The Measurement of Technical Change Biases with Many Factors of Production," American Economic Review, American Economic Association, vol. 64(6), pages 964-76, December.
  16. George J. Borjas, 1986. "The Demographic Determinants of the Demand for Black Labor," NBER Chapters, in: The Black Youth Employment Crisis, pages 191-232 National Bureau of Economic Research, Inc.
  17. Chung, Jae Wan, 1987. "On the Estimation of Factor Substitution in the Translog Model," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 409-17, August.
  18. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
  19. Denny, Michael & Fuss, Melvyn A, 1977. "The Use of Approximation Analysis to Test for Separability and the Existence of Consistent Aggregates," American Economic Review, American Economic Association, vol. 67(3), pages 404-18, June.
  20. H. Bhorat & J. Hodge, 1999. "Decomposing Shifts in Labour Demand in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 67(3), pages 155-168, 09.
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  22. Nicoli Nattrass, 2004. "Unemployment and aids: the social-democratic challenge for South Africa," Development Southern Africa, Taylor & Francis Journals, vol. 21(1), pages 87-108.
  23. Berndt, Ernst R & Christensen, Laurits R, 1973. "The Internal Structure of Functional Relationships: Separability, Substitution and Aggregation," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 403-10, July.
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Cited by:
  1. Elie Appelbaum & Ulrich Kohli, 1997. "Import Price Uncertainty And The Distribution Of Income," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 620-630, November.
  2. Sparrow, G.N. & Ortmann, Gerald F. & Lyne, Michael C. & Darroch, Mark A.G., 2008. "Determinants of the demand for regular farm labour in South Africa, 1960-2002," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 47(1), March.

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