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Evaluating the general equilibrium effects of a wage subsidy scheme for South Africa

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  • Kalie Pauw
  • Lawrence Edwards

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

Abstract

Unemployment among semi- and unskilled workers has reached severe proportions (over 50 %) and threatens the political and economic stability of the South African economy. In this paper a computable general equilibrium (CGE) model of the South African economy to assess the economy-wide impact of a wage subsidy targeted at semi- and unskilled workers. We find that employment of semi- and unskilled workers can be raised quite significantly, although the financial costs can be substantial. The targeting of the correct sectors as well as the budgetary process (deficit financed versus balanced budget) followed play an important role in the outcome.

Suggested Citation

  • Kalie Pauw & Lawrence Edwards, 2005. "Evaluating the general equilibrium effects of a wage subsidy scheme for South Africa," Working Papers 21, Economic Research Southern Africa.
  • Handle: RePEc:rza:wpaper:21
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    Cited by:

    1. Rob Davies & James Thurlow, 2010. "Formal–Informal Economy Linkages And Unemployment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 78(4), pages 437-459, December.
    2. Levinsohn, James & Pugatch, Todd, 2014. "Prospective analysis of a wage subsidy for Cape Town youth," Journal of Development Economics, Elsevier, pages 169-183.
    3. K. Pauw & M. Oosthuizen & C. Van der westhuizen, 2008. "Graduate Unemployment In The Face Of Skills Shortages: A Labour Market Paradox," South African Journal of Economics, Economic Society of South Africa, vol. 76(1), pages 45-57, March.
    4. Burns, Justine & Edwards, Lawrence & Pauw, Karl, 2010. "Wage subsidies to combat unemployment and poverty," IFPRI discussion papers 969, International Food Policy Research Institute (IFPRI).
    5. Delfin Go & Marna Kearney & Vijdan Korman & Sherman Robinson & Karen Thierfelder, 2010. "Wage Subsidy and Labour Market Flexibility in South Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 46(9), pages 1481-1502.
    6. Louise Roos, 2013. "Construction of a database for a dynamic CGE model for South Africa," Centre of Policy Studies/IMPACT Centre Working Papers g-234, Victoria University, Centre of Policy Studies/IMPACT Centre.

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