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A Partial General Equilibrium Analysis of Fiscal Policy Injection on Poverty and Inequality in South Africa

Author

Listed:
  • Kambale Kavese

    (Nelson Mandela University)

  • Andrew Phiri

    (Nelson Mandela University)

Abstract

This study employs a partial general equilibrium approach calibrated on the Social Accounting Matrix (SAM) and a contemporaneous dynamic computable general equilibrium (CGE) model to assess the effect of expansionary fiscal policy on economic growth, income inequality, poverty, employment and inequality reduction in South Africa. The simulation results reveal that expansionary fiscal policy i) benefits rich ‘white’ households the most and poor ‘coloured’ households the least ii) improves adult employment more than youth employment iii) improves employment in urban areas as proposed to employment in rural areas iv) has a very small effect on improving economic growth and reducing the Gini coefficient v) benefits ‘well-off’ households more than it does ‘poor’ households vi) promotes ‘low-skilled’ employment more than it does for ‘high-skilled’ labourers. Associated policy implications based on our findings are also discussed.

Suggested Citation

  • Kambale Kavese & Andrew Phiri, 2020. "A Partial General Equilibrium Analysis of Fiscal Policy Injection on Poverty and Inequality in South Africa," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 16(2), pages 31-45, APRIL.
  • Handle: RePEc:dug:actaec:y:2020:i:2:p:31-45
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