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Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa

Author

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  • Servaas van der Berg

    (University of Stellenbosch)

Abstract

South Africa faces the intertwined challenges of weak economic growth, persistently high poverty and extreme income inequality. This paper assesses what levels of poverty reduction and distributional change are realistically achievable over the next fifteen years under plausible growth scenarios, given binding structural and fiscal constraints. Using a stylised log-normal income distribution calibrated to 2023 data, the analysis simulates poverty outcomes under sustained per capita growth rates of 1–2 per cent (consistent with GDP growth of 2–3 per cent) and cumulative Gini reductions of 0, 2, 4 and 6 points. The results reveal a clear asymmetry. Moderate growth generates substantial reductions in poverty at both lower- and upper-bound poverty lines, while plausible medium-term reductions in inequality make a smaller incremental contribution. van der Berg, S. (2026). Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa (ERSA Policy Paper No. 48). Economic Research Southern Africa. https://doi.org/10.71587/rr3y8746

Suggested Citation

  • Servaas van der Berg, 2026. "Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa," ERSA Working Paper Series 310, Economic Research Southern Africa, revised May 2026.
    • Handle: RePEc:rza:ersawp:310
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    References listed on IDEAS

    as
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    6. Peter G. Moll, 1998. "Primary Schooling, Cognitive Skills and Wages in South Africa," Economica, London School of Economics and Political Science, vol. 65(258), pages 263-284, May.
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    8. Martin Ravallion, 2022. "Growth Elasticities of Poverty Reduction," NBER Working Papers 30401, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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