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Inequality Traps and Human Capital Accumulation in South Africa

Author

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  • Miquel Pellicer

    (SALDRU, School of Economics, University of Cape Town)

  • Vimal Ranchhod

    (SALDRU, School of Economics, University of Cape Town)

Abstract

We consider the interaction between human capital accumulation and inequality in South Africa. We start by discussing three alternative theoretical frameworks that relate inequality and investment decisions in post-secondary education; namely the 'perfect credit markets hypothesis', the 'imperfect credit markets hypothesis' and the 'social externalities hypothesis'. Each of these suggests different policy implications. We then consider which of these seems to have the most validity in the South African context, by presenting some original analysis as well as considering some of the related literature. Our findings suggest that South Africa is indeed in an 'inequality trap' situation and that credit markets do not work well. There is some evidence that social externalities compound the effects of the imperfect credit markets. We conclude with a discussion of possible policy directions. These include information on eligibility to tertiary institutes of education, awareness campaigns regarding public financing options, subsidization of application and registration fees and efforts to improve school quality at the primary and secondary levels.

Suggested Citation

  • Miquel Pellicer & Vimal Ranchhod, 2012. "Inequality Traps and Human Capital Accumulation in South Africa," SALDRU Working Papers 86, Southern Africa Labour and Development Research Unit, University of Cape Town.
  • Handle: RePEc:ldr:wpaper:86
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    References listed on IDEAS

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    1. Anne Case & Angus Deaton, 1999. "School Inputs and Educational Outcomes in South Africa," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 1047-1084.
    2. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    3. Robert Garlick, 2018. "Academic Peer Effects with Different Group Assignment Policies: Residential Tracking versus Random Assignment," American Economic Journal: Applied Economics, American Economic Association, vol. 10(3), pages 345-369, July.
    4. Bertola, Giuseppe, 2000. "Macroeconomics of distribution and growth," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 9, pages 477-540 Elsevier.
    5. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    6. Roland Benabou, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 619-652.
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    Cited by:

    1. Nicola Branson & Amy Kahn, 2016. "The Post Matriculation Enrolment Decision: Do Public Colleges Provide Students with a Viable Alternative? Evidence from the First Four Waves of the National Income Dynamics Study," SALDRU Working Papers 182, Southern Africa Labour and Development Research Unit, University of Cape Town.
    2. Lumengo Bonga-bonga & Maphelane Phume, 2018. "Assessing the relationship between total factor productivity and foreign direct investment in an economy with a skills shortage: the case of South Africa," Economics Bulletin, AccessEcon, vol. 38(3), pages 1395-1405.
    3. Kezia Lilenstein & Ingrid Woolard & Murray Leibbrandt, 2016. "In-Work Poverty in South Africa: The Impact of Income Sharing in the Presence of High Unemployment," SALDRU Working Papers 193, Southern Africa Labour and Development Research Unit, University of Cape Town.
    4. Finn, Arden & Leibbrandt, Murray & Oosthuizen, Morne, 2014. "Poverty, inequality, and prices in post-apartheid South Africa," WIDER Working Paper Series 127, World Institute for Development Economic Research (UNU-WIDER).

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