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Understanding South Africa's economic puzzles

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  • Dani Rodrik

Abstract

South Africa has undergone a remarkable transformation since its democratic transition in 1994, but economic growth and employment generation have been disappointing. Most worryingly, unemployment is currently among the highest in the world. While the proximate cause of high unemployment is that prevailing wages levels are too high, the deeper cause lies elsewhere, and is intimately connected to the inability of the South African to generate much growth momentum in the past decade. High unemployment and low growth are both ultimately the result of the shrinkage of the non-mineral tradable sector since the early-1990s. The weakness in particular of export-oriented manufacturing has deprived South Africa of growth opportunities as well as of job creation at the relatively low end of the skill distribution. Econometric analysis identifies the decline in the relative profitability of manufacturing in the 1990s as the most important contributor to the lack of vitality in that sector. Copyright (c) 2008 The Authors. Journal compilation (c) 2008 The European Bank for Reconstruction and Development.

Suggested Citation

  • Dani Rodrik, 2008. "Understanding South Africa's economic puzzles ," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 769-797, October.
  • Handle: RePEc:bla:etrans:v:16:y:2008:i:4:p:769-797
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    References listed on IDEAS

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    1. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
    2. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    3. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," Working Paper Series rwp04-047, Harvard University, John F. Kennedy School of Government.
    4. Lawrence Edwards & Robert Lawrence, 2006. "South African Trade Policy Matters: Trade Performance & Trade Policy," CID Working Papers 135, Center for International Development at Harvard University.
    5. Kingdon, Geeta Gandhi & Knight, John, 2004. "Unemployment in South Africa: The Nature of the Beast," World Development, Elsevier, vol. 32(3), pages 391-408, March.
    6. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, pages 603-633.
    7. Ricardo Hausmann & Jason Hwang & Dani Rodrik, 2007. "What you export matters," Journal of Economic Growth, Springer, vol. 12(1), pages 1-25, March.
    8. Murray Leibbrandt & James Levinsohn & Justin McCrary, 2005. "Incomes in South Africa since the fall of Apartheid," Working Papers 536, Research Seminar in International Economics, University of Michigan.
    9. Robert Pollin & Gerald Epstein & James Heintz & Léonce Ndikumana, 2006. "An Employment-targeted Economic Programme for South Africa," Country Study 1, International Policy Centre for Inclusive Growth.
    10. Lawrence Edwards & Robert Z. Lawrence, 2006. "South African Trade Policy Matters: Trade Performance and Trade Policy," NBER Working Papers 12760, National Bureau of Economic Research, Inc.
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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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