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The labour market and household income inequality in South Africa: existing evidence and new panel data

  • Murray Leibbrandt

    (School of Economics, University of Cape Town, S. Africa)

  • Ingrid Woolard

    (Department of Economics, University of Port Elizabeth, S. Africa)

South Africa's very high Gini coefficient has always served as the starkest indicator of the country's extreme inequality. The racial legacy has always been highlighted in explaining this inequality. This paper presents evidence that between race contributions to inequality have declined from the early 1970s to the mid 1990s. However, they are still considerably higher than comparative international figures. The racially rigged labour market has always been assumed to operate as the key force underlying these changing inequality patterns and the paper presents findings for more formal decompositions of the linkage between the labour market and household inequality. This work confirms the dominance of the labour market in driving total South African, African and even KwaZulu-Natal inequality. However, the contribution of wage income is uneven across these different levels of aggregation and across time; suggesting complex patterns of inequality generation. The following lengthy section of the paper uses a panel data set to measure and explain the mobility patterns of a sample of African households in Kwazulu-Natal. It is found that there was less income mobility at the top and the bottom of the distribution than in the middle and overall there was an increase in income differentiation. Simple mobility profiling and more complex modelling confirm the importance of labour market changes in influencing movement of real adult equivalent income of households as well as mobility across deciles, across poverty lines. Demographic changes are also seen to be very important. The paper concludes with a summary and some suggestions for further work. Copyright © 2001 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.806
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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 13 (2001)
Issue (Month): 6 ()
Pages: 671-689

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Handle: RePEc:wly:jintdv:v:13:y:2001:i:6:p:671-689
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  1. Levison, D. & Lam, D., 1990. "Declining Inequality In Schooling In Brazil And Its Effects On Inequality In Earning," Papers 618, Yale - Economic Growth Center.
  2. Leibbrandt, Murray & Woolard, Christopher & Woolard, Ingrid, 2000. "The Contribution of Income Components to Income Inequality in the Rural Former Homelands of South Africa: A Decomposable Gini Analysis," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 9(1), pages 79-99, March.
  3. Almeida dos Reis, Jose Guilherme & Paes de Barros, Ricardo, 1991. "Wage inequality and the distribution of education : A study of the evolution of regional differences in inequality in metropolitan Brazil," Journal of Development Economics, Elsevier, vol. 36(1), pages 117-143, July.
  4. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
  5. Aaberge, Rolf & Björklund, Anders & Jäntti, Markus & Palme, Mårten & Pedersen, Peder & Smith, Nina & Wennemo, Tom, 1996. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," SSE/EFI Working Paper Series in Economics and Finance 98, Stockholm School of Economics, revised Aug 2002.
  6. 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).
  7. Glewwe, Paul, 1991. "Investigating the determinants of household welfare in Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 35(2), pages 307-337, April.
  8. Leibbrandt, M.V. & Woolard, C.D. & Woolard, I.D., 1996. "The Contribution of Income Components to Income Inequality in South Africa: A Decomposable Gini Analysis," Papers 125, World Bank - Living Standards Measurement.
  9. Richard V. Burkhauser & John G. Poupore, 1997. "A Cross-National Comparison Of Permanent Inequality In The United States And Germany," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 10-17, February.
  10. Ingrid Woolard & Murray Leibbrandt, 1999. "Household Incomes, Poverty and Inequality in a Multivariate Framework," Working Papers 99031, University of Cape Town, Development Policy Research Unit.
  11. 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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