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Homing in on the Core – Households Incomes, Income Sources and Geography in South Africa

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  • Sten Dieden

    (Riso National Laboratory)

Abstract

The focus of this study is on household income generation among previously disadvantaged households in South Africa. Previous research has found that poverty among South African households was associated with the extent to which workers and their dependants were integrated into the South African core economy. This study investigates whether a similar conception can be ascertained in multivariate regression analysis. Households’ income sources are divided into categories that reflect differing extents of association with the core economy. Ensuing further justification by results from descriptive analyses, the income source categories are utilised as explanatory variables to investigate whether inter-household variation in income sources can explain variation in income levels. For the latter purposes, the results from the estimation of three reduced form models are compared. All three models have households’ log-income levels as dependent variables and share a set of household characteristics as explanatory variables. Two of the models are two-stage specifications that use provincial locations in the construction of instruments for income source categories. The third specification contains no income source variables but includes provincial locations as explanatory variables. The results show that, as compared to the specification with provincial locations, income sources can be incorporated as explanatory variables into multivariate regression analyses without considerable loss of explanatory power. Controls for endogeneity must however be applied. The partial impacts from income sources are statistically significant and their signs are in accordance with expectations. For some income sources the magnitudes of the impacts are not in correspondence with what may be expected from the descriptive analysis. The latter results suggest that households in different main income source categories also differ systematically in their demographic and educational endowments. When assimilated with results from the descriptive analyses, the estimated partial impacts from the different provinces support this interpretation.

Suggested Citation

  • Sten Dieden, 2004. "Homing in on the Core – Households Incomes, Income Sources and Geography in South Africa," Working Papers 04090, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:04090
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    File URL: http://hdl.handle.net/11427/7374
    File Function: First version, 2004
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    References listed on IDEAS

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