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Agricultural Distortions, Poverty and Inequality in South Africa

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  • Herault, Nicolas
  • Thurlow, James

Abstract

South Africa has rapidly reduced trade barriers since the end of Apartheid, yet agricultural production and exports have remained sluggish. Also, poverty and unemployment have risen and become increasingly concentrated in rural areas. This paper examines the extent to which remaining price distortions, both domestic and foreign, are contributing to the underperformance of the agricultural sector vis-à-vis the rest of the economy. We draw on a computable general equilibrium (CGE) and micro-simulation model of South Africa that are linked to the results of a global trade model. This framework is used to examine the effects of eliminating global and domestic price distortions. Model results indicate that South Africa’s agricultural sector currently benefits from global price distortions, and that removing these would create more jobs for lower-skilled workers, thereby reducing income inequality and poverty. We also find that South Africa’s own policies are biased against agriculture and that removing domestic distortions would raise agricultural production. Job losses in nonagricultural sectors would be outweighed by job creation in agriculture, such that overall employment rises and poverty falls. Overall, our findings suggest that South Africa’s own policies are more damaging to its welfare, poverty and inequality than distortionary policies in the rest of the world. Existing national price distortions may thus explain some of the poor performance of South Africa’s agricultural sector and rural development.

Suggested Citation

  • Herault, Nicolas & Thurlow, James, 2009. "Agricultural Distortions, Poverty and Inequality in South Africa," Agricultural Distortions Working Paper 52792, World Bank.
  • Handle: RePEc:ags:wbadwp:52792
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    File URL: http://purl.umn.edu/52792
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    References listed on IDEAS

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    1. Kym Anderson & Peter Lloyd & Donald Maclaren, 2007. "Distortions to Agricultural Incentives in Australia Since World War II," The Economic Record, The Economic Society of Australia, vol. 83(263), pages 461-482, December.
    2. By Gunnar Jonsson & Arvind Subramanian, 2001. "Dynamic Gains from Trade: Evidence from South Africa," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-8.
    3. L Edwards, 2001. "Globalisation And The Skills Bias Of Occupational Employment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(1), pages 40-71, March.
    4. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    5. Kym Anderson & William A. Masters, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications, The World Bank, number 2607.
    6. Daniela Casale & Colette Muller & Dorrit Posel, 2004. "'Two Million Net New Jobs': A Reconsideration Of The Rise In Employment In South Africa, 1995-2003," South African Journal of Economics, Economic Society of South Africa, vol. 72(5), pages 978-1002, December.
    7. Nicolas Herault, 2007. "Trade Liberalisation, Poverty and Inequality in South Africa: A Computable General Equilibrium-Microsimulation Analysis," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 317-328, September.
    8. Johann Kirsten & Julian May & Sheryl Hendriks & Charles L. Machethe & Cecelia Punt & Mike Lyne, 2007. "South Africa," Chapters,in: Beyond Food Production, chapter 8 Edward Elgar Publishing.
      • Nick Vink & Gavin Williams & Johann Kirsten, 2004. "South Africa," Chapters,in: The World's Wine Markets, chapter 12 Edward Elgar Publishing.
    9. Valenzuela, Ernesto & Kym Anderson, 2009. "Alternative Agricultural Price Distortions for CGE Analysis of Developing Countries, 2004 and 1980-84," GTAP Research Memoranda 2925, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    10. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
    11. Kirsten, Johann F. & Edwards, Lawrence & Vink, Nick, 2007. "Distortions to Agricultural Incentives in South Africa," Agricultural Distortions Working Paper 48514, World Bank.
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    Cited by:

    1. UNDP Regional Bureau for Africa, "undated". "Agriculture, Rural Poverty and Income Inequality in sub-Saharan Africa," UNDP Africa Policy Notes 2017-05, United Nations Development Programme, Regional Bureau for Africa.

    More about this item

    Keywords

    Distorted incentives; agricultural and trade policy reforms; national agricultural development; Agricultural and Food Policy; International Relations/Trade; F13; F14; Q17; Q18;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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