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Institutional wage-setting, labour demand and labour supply: Causal estimates from a South African pseudo-panel

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  • Dieter von Fintel

Abstract

Unemployment in South Africa has multiple causes. This article uses a district pseudo-panel to estimate the elasticity of labour demand, labour supply and unemployment with respect to wages. We assess whether hiring decisions are more sensitive to increases in wages of low-paid workers than high-paid workers, and whether wage growth prompts entry into the labour market. These channels combine to result in the positive causal effect of wage growth on unemployment. The research investigates whether these effects are dominated by districts in which unionisation rates are high and employment is concentrated in large firms. Wage growth of middle-paid to highly paid workers – as opposed to low-paid workers – reduces local labour demand and raises local unemployment. Bargaining arrangements correspond closely to the spatial wage distribution; in turn, a large part of the impact that wage growth has on labour market outcomes is determined by these wage-setting institutions.

Suggested Citation

  • Dieter von Fintel, 2017. "Institutional wage-setting, labour demand and labour supply: Causal estimates from a South African pseudo-panel," Development Southern Africa, Taylor & Francis Journals, vol. 34(1), pages 1-16, January.
    • Handle: RePEc:taf:deveza:v:34:y:2017:i:1:p:1-16
    DOI: 10.1080/0376835X.2016.1269637
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    Cited by:

    1. Mohimont, Jolan, 2022. "Welfare effects of business cycles and monetary policies in a small open emerging economy," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    2. D.P. von Fintel, 2018. "Long-Run Spatial Inequality in South Africa: Early Settlement Patterns and Separate Development," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 42(2), pages 81-102, August.
    3. Odile Mackett, 2022. "Decent Work in the South African Macroeconomy: Who are The Winners and Losers?," Humanistic Management Journal, Springer, vol. 7(2), pages 277-305, October.
    4. Jirjahn, Uwe, 2025. "Unions and Collective Bargaining in Sub-Saharan Africa: Some Insights from Quantitative Studies," GLO Discussion Paper Series 1550, Global Labor Organization (GLO).
    5. Amy Thornton, 2025. "Own- and cross-price elasticities of (cohabiting) married women's labour supply in South Africa," WIDER Working Paper Series wp-2025-85, World Institute for Development Economic Research (UNU-WIDER).
    6. Monique B. Reid & Pierre L. Siklos, 2022. "How Firms and Experts View The Phillips Curve: Evidence from Individual and Aggregate Data from South Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(12), pages 3355-3376, September.
    7. Ihsaan Bassier, 2021. "The impact of centralized bargaining on spillovers and the wage structure in monopsonistic labour markets," WIDER Working Paper Series wp-2021-132, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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