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The elasticity of substitution and labour-displacing technical change in post-apartheid South Africa

Listed author(s):
  • Rankin Neil
  • Burger Rulof
  • Kreuser Friedrich

This paper uses normalized constant elasticity of substitution production functions to estimate the elasticity of substitution and labour-augmenting technical change in South Africa over the period 1994-2012. We find elasticities of 0.6-0.9 and positive labour-augmenting technical change, which results in an increase in capital.s income share relative to labour. More broadly, we find total factor productivity (TFP) growth rates of between 1 and 2 per cent across industries, although we find no TFP growth in the mining sector. We also find that the sector with the highest TFP growth.agriculture.achieved this through shedding labour while steadily increasing output.

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File URL: https://www.wider.unu.edu/sites/default/files/WP2015-101--.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series WIDER Working Paper Series with number 101.

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Length: 35
Date of creation: 2015
Handle: RePEc:unu:wpaper:wp2015-101
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  1. repec:ilo:ilowps:484770 is not listed on IDEAS
  2. Mikael Lindahl & Alan B. Krueger, 2001. "Education for Growth: Why and for Whom?," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1101-1136, December.
  3. Miguel A. León-Ledesma & Peter McAdam & Alpo Willman, 2010. "Identifying the Elasticity of Substitution with Biased Technical Change," American Economic Review, American Economic Association, vol. 100(4), pages 1330-1357, September.
  4. Nicola Branson & Martin Wittenberg, 2014. "Reweighting South African National Household Survey Data to Create a Consistent Series Over Time: A Cross-Entropy Estimation Approach," South African Journal of Economics, Economic Society of South Africa, vol. 82(1), pages 19-38, March.
  5. Miriam Altman, 2008. "Revisiting South African Employment Trends In The 1990s," South African Journal of Economics, Economic Society of South Africa, vol. 76(s2), pages 126-147, August.
  6. Alberto Behar, 2010. "Would Cheaper Capital Replace Labour?," South African Journal of Economics, Economic Society of South Africa, vol. 78(2), pages 131-151, June.
  7. Fedderke, Johannes W. & Hill, Andrew J., 2011. "Industry structure and labor market flexibility in the South African manufacturing sector: A time series and panel data approach," Economic Modelling, Elsevier, vol. 28(3), pages 1291-1302, May.
  8. Lumengo Bonga-bonga, 2009. "The South African Aggregate Production Function: Estimation Of The Constant Elasticity Of Substitution Function," South African Journal of Economics, Economic Society of South Africa, vol. 77(2), pages 332-349, June.
  9. Rulof Burger & Derek Yu, 2006. "Wage trends in post-apartheid South Africa: Constructing an earnings series from household survey data," Working Papers 10/2006, Stellenbosch University, Department of Economics.
  10. León-Ledesma, Miguel A. & McAdam, Peter & Willman, Alpo, 2010. "In dubio pro CES - Supply estimation with mis-specified technical change," Working Paper Series 1175, European Central Bank.
  11. Rainer Klump & Peter McAdam & Alpo Willman, 2007. "Factor Substitution and Factor-Augmenting Technical Progress in the United States: A Normalized Supply-Side System Approach," The Review of Economics and Statistics, MIT Press, vol. 89(1), pages 183-192, February.
  12. Cantore, C. & Levine, P., 2012. "Getting normalization right: Dealing with ‘dimensional constants’ in macroeconomics," Journal of Economic Dynamics and Control, Elsevier, vol. 36(12), pages 1931-1949.
  13. Mallick, Debdulal, 2012. "The role of the elasticity of substitution in economic growth: A cross-country investigation," Labour Economics, Elsevier, vol. 19(5), pages 682-694.
  14. Olivier de La Grandville & Rainer Klump, 2000. "Economic Growth and the Elasticity of Substitution: Two Theorems and Some Suggestions," American Economic Review, American Economic Association, vol. 90(1), pages 282-291, March.
  15. Wittenberg, Martin., 2014. "Analysis of employment, real wage, and productivity trends in South Africa since 1994," ILO Working Papers 994847703402676, International Labour Organization.
  16. Nicola Branson, 2009. "Re-weighting the OHS and LFS National household Survey Data to create a consistent series over time: A Cross Entropy Estimation Approach," SALDRU Working Papers 38, Southern Africa Labour and Development Research Unit, University of Cape Town.
  17. Rainer Klump & Peter McAdam & Alpo Willman, 2012. "The Normalized Ces Production Function: Theory And Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 769-799, December.
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