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The persistence of apartheid regional wage disparities in South Africa

Author

Listed:
  • Gibson Mudiriza

    (University of Cape Town)

  • Lawrence Edwards

    (University of Cape Town)

Abstract

Despite the ending of apartheid, regional wage disparities remain prevalent in South Africa with the former homelands characterised by persistently low wages and incomes. In this paper, we use a new economic geography (NEG) model to estimate the extent to which the persistence in apartheid regional wage disparities are an outcome of economic forces such as access to markets. We estimate a structural wage equation derived directly from the NEG theory for 354 regions over the period 1996 to 2011. We find support for the NEG model in explaining regional wage disparities across regions in South Africa, although the market access effects are highly localised in view of high distance coefficients. We also find a wage deficit in homeland areas even after controlling for NEG and other region-specific characteristics. Average wages of workers in homeland areas were 11.8% lower than predicted in 1996, with this gap rising to 13.3% in 2011. This gap remains using alternative estimation approaches and the inclusion of controls for infrastructure, removal of incentives under the deconcentration policies and local amenities.

Suggested Citation

  • Gibson Mudiriza & Lawrence Edwards, 2020. "The persistence of apartheid regional wage disparities in South Africa," ERSA Working Paper Series 115, Economic Research Southern Africa.
    • Handle: RePEc:rza:ersawp:115
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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