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Poverty, Inequality and the Role of Social Grants: An Analysis using Decomposition Techniques


  • Paula Armstrong

    () (Department of Economics, University of Stellenbosch)

  • Cobus Burger

    () (Department of Economics, University of Stellenbosch)


Despite South Africa’s transition from apartheid in 1994, the social landscape is still fragmented along racial lines. However, South Africa has an impressive social grants system by international standards, with social assistance spending as a percentage of GDP comparing to Western European countries during the 1980s (the height of the welfare state). This paper investigates the impact of social grants poverty and inequality in South African. Using the Income and Expenditure Survey of 2005 (IES2005) the normalized Foster-Greer-Thorbecke (FGT) measure and the General Entropy (GE) measure (to assess the impact of social grants on poverty and inequality, respectively), it is found that social grants have a considerable impact on poverty, and that this impact increases as the poverty measure being used becomes more sensitive to the severity of poverty. In terms of inequality, it is found that social grants have a negligible impact. The reason for this is that inequality is largely driven by the upper end of the income distribution – a group who do not receive social grants.

Suggested Citation

  • Paula Armstrong & Cobus Burger, 2009. "Poverty, Inequality and the Role of Social Grants: An Analysis using Decomposition Techniques," Working Papers 15/2009, Stellenbosch University, Department of Economics.
  • Handle: RePEc:sza:wpaper:wpapers87

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    Cited by:

    1. Ivan Turok & Josh Budlender & Justin Visagie, 2017. "The Role of Informal Urban Settlements in Upward Mobility," Working Papers 201701, University of Cape Town, Development Policy Research Unit.
    2. Posel, Dorrit & Rogan, Michael, 2014. "Measured as poor versus feeling poor: Comparing objective and subjective poverty rates in South Africa," WIDER Working Paper Series 133, World Institute for Development Economic Research (UNU-WIDER).
    3. Luca Tiberti & Hélène Maisonnave & Margaret Chitiga & Ramos Mabugu & Véronique Robichaud & Stewart Ngandu, 2013. "The Economy-wide Impacts of the South African Child Support Grant: a Micro-Simulation-Computable General Equilibrium Analysis," Cahiers de recherche 1303, CIRPEE.
    4. repec:spr:soinre:v:134:y:2017:i:2:d:10.1007_s11205-016-1433-z is not listed on IDEAS
    5. Jude Okechukwu Chukwu, 2017. "Estimating Inequality Semi-elasticity of Poverty Reduction in Nigeria," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 1087-1101, April.

    More about this item


    Welfare and Poverty; Government Policy; Provision and Effects of Welfare Programmes; Measurement and Analysis of Poverty; Inequality;

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • 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

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