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A Fiscus for Better Economic and Social Development in South Africa

Author

Listed:
  • Francois J. Stofberg

    (Economist, Efficient Group)

  • Jan H. van Heerden

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Heinrich R. Bohlmann

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

Abstract

After showing that the bulk of government expenditure is unproductive, we consider the impact of an alternative fiscal policy mix in South Africa. The alternative suggests freezing the real government wage bill for five years and using the savings generated by this decision to increase spending on a specific, productive and wealth-creative expenditure item, aggregate investments. By indirectly contributing to greater levels of investments we show how government can generate better levels of economic performance and social development. To analyse the economic consequences of the suggested fiscal policy mix we use TERM-SA a dynamic, regional computable general equilibrium model of South Africa. We also add additional features to provide more accurate and detailed results. Our results show that a wage freeze can increase both real GDP (5.9%) and employment (456,00 jobs) in the long-term.

Suggested Citation

  • Francois J. Stofberg & Jan H. van Heerden & Heinrich R. Bohlmann, 2020. "A Fiscus for Better Economic and Social Development in South Africa," Working Papers 202072, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202072
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    References listed on IDEAS

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    More about this item

    Keywords

    Computable general equilibrium models; households; social accounting matrix; regional economics; policy modelling;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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