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The Relationship Between Unemployment and Earnings Inequality in South Africa

  • Tregenna, F.

Unemployment and earnings inequality have moved closely together in South Africa in recent years, suggesting that there may not be a trade-off between them as the literature generally suggests. This article explores the relationship between unemployment and earnings inequality in South Africa, specifically investigating the extent to which changes in unemployment can account for changes in earnings inequality. Decomposing overall income inequality by factor source shows the overwhelming importance of earnings in income inequality more generally. Decomposing earnings inequality by employment status reveals the centrality of unemployment in accounting for the level and trend of earnings inequality. The distribution of employment in the formal and informal sectors is found to be of lesser importance in explaining earnings inequality, as is wage dispersion within each of these categories. The findings point to the critical importance of reducing unemployment in South Africa if the extremely high levels of inequality are to be addressed.

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File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0907.pdf
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Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0907.

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Date of creation: Feb 2009
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Handle: RePEc:cam:camdae:0907
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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  1. Luis Ayala & Rosa Martinez & Jesus Ruiz-Huerta, 2002. "Institutional determinants of the unemployment-earnings inequality trade-off," Applied Economics, Taylor & Francis Journals, vol. 34(2), pages 179-195.
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  7. Ozler, Berk, 2007. "Not Separate, Not Equal: Poverty and Inequality in Post-apartheid South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 55(3), pages 487-529, April.
  8. Silber, Jacques, 1993. "Inequality Decomposition by Income," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 545-47, August.
  9. Gonzalvez, M. & Menendez, A., 2000. "The Effect of Unemployment on Labor Earnings Inequality: Argentina in the Nineties," Papers 193, Princeton, Woodrow Wilson School - Development Studies.
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  11. Murray Leibbrandt & Ingrid Woolard, 2001. "The labour market and household income inequality in South Africa: existing evidence and new panel data," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 671-689.
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  13. 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 125a, World Bank - Living Standards Measurement.
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  15. Phillippe G. Leite & Terry McKinley & Rafael Guerreiro Osório, 2006. "The Post-Apartheid Evolution of Earnings Inequality in South Africa, 1995-2004," Working Papers 32, International Policy Centre for Inclusive Growth.
  16. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
  17. Adsera, A. & Boix, C., 1998. "Must We Choose? European Unemployment, American Inequality and the Impact of Education and Labour Market Institutions," UFAE and IAE Working Papers 414.98, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  18. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
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