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Understanding the Democratic Transition in South Africa

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  • Robert P. Inman
  • Daniel L. Rubinfeld

Abstract

South Africa's transition from apartheid to democracy stands as one of the past century's most important political events. The transition has been successful to this point because the new constitution adopted a form of federal governance that has been able to provide protection for the economic elite from maximal redistributive taxation. Appropriately structured, federal governance creates a "hostage game" in which the majority central government controls the tax rate but elite run province(s) control the provision of important redistributive services to a significant fraction of lower income households. At least to today, the political economy of South Africa has found a stable equilibrium with less than maximal redistributive taxation. Moreover, the move to a democratic federalist system has improved the economic welfare of both the white minority and the black majority. Whether the federal structure can continue to check maximal taxation depends crucially upon the rate of time preference of the majority and their demands for redistributive public services. A new, impatient and more radical majority (ANC) party threatens the current equilibrium.

Suggested Citation

  • Robert P. Inman & Daniel L. Rubinfeld, 2012. "Understanding the Democratic Transition in South Africa," NBER Working Papers 17799, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17799
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    References listed on IDEAS

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    1. Andrés Rodríguez-Pose & Roberto Ezcurra, 2011. "Is fiscal decentralization harmful for economic growth? Evidence from the OECD countries," Journal of Economic Geography, Oxford University Press, vol. 11(4), pages 619-643, July.
    2. Jing Jin & Chunli Shen & Qian Wang & Heng-fu Zou, 2012. "Decentralization in China," CEMA Working Papers 546, China Economics and Management Academy, Central University of Finance and Economics.
    3. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 679-705.
    4. Gary Clyde Hufbauer & Jeffrey J. Schott & Kimberly Ann Elliott, 1990. "Economic Sanctions Reconsidered: 2nd Edition," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 82, January.
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    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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