Wage subsidy and labor market flexibility in south Africa
In this paper, the authors use a highly disaggregate general equilibrium model to analyze the feasibility of a wage subsidy to unskilled workers in South Africa, isolating and estimating its potential employment effects and fiscal cost. They capture the structural characteristics of the labor market with several labor categories and substitution possibilities, linking the economy-wide results on relative prices, wages, and employment to a micro-simulation model with occupational choice probabilities in order to investigate the poverty and distributional consequences of the policy. The impact of a wage subsidy on employment, poverty, and inequality in South Africa depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labor are complements in production. The desired results are attainable only if there is sufficient flexibility in the labor market. Although the impact in a low case scenario can be improved by supporting policies that relax the skill constraint and increase the production capacity of the economy especially towards labor-intensive sectors, the gains from a wage subsidy are still modest if the labor market remains very rigid.
|Date of creation:||01 Mar 2009|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dani Rodrik, 2006.
"Understanding South Africa's Economic Puzzles,"
- Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008.
"Why has unemployment risen in the New South Africa?,"
The Economics of Transition,
The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
- Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2007. "Why Has Unemployment Risen in the New South Africa," NBER Working Papers 13167, National Bureau of Economic Research, Inc.
- E. Paul Durrenberger, 2005. "Labour," Chapters, in: A Handbook of Economic Anthropology, chapter 8 Edward Elgar Publishing.
- Kalie Pauw & Lawrence Edwards, 2005.
"Evaluating the general equilibrium effects of a wage subsidy scheme for South Africa,"
21, Economic Research Southern Africa.
- Kalie Pauw & Lawrence Edwards, 2006. "Evaluating The General Equilibrium Effects Of A Wage Subsidy Scheme For South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 442-462, 09.
- Philippe Aghion & Matias Braun & Johannes Fedderke, 2008.
"Competition and productivity growth in South Africa,"
The Economics of Transition,
The European Bank for Reconstruction and Development, vol. 16(4), pages 741-768, October.
- Philippe Aghion & Matias Braun & Johannes Fedderke, 2007. "Competition and Productivity Growth in South Africa," Working Papers 54, Economic Research Southern Africa.
- Aghion, Philippe & Braun, Matias & Fedderke, Johannes, 2008. "Competition and Productivity Growth in South Africa," Scholarly Articles 3350068, Harvard University Department of Economics.
- Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
- Geeta Kingdon & John Knight, 2004.
"Unemployment in South Africa: the nature of the beast,"
Labor and Demography
- Kingdon, Geeta Gandhi & Knight, John, 2004. "Unemployment in South Africa: The Nature of the Beast," World Development, Elsevier, vol. 32(3), pages 391-408, March.
- Geeta G. Kingdon & John B. Knight, 2001. "Unemployment in South Africa: The nature of the beast," CSAE Working Paper Series 2001-15, Centre for the Study of African Economies, University of Oxford.
- Essama-Nssah, B. & Go, Delfin S. & Kearney, Marna & Korman, Vijdan & Robinson, Sherman & Thierfelder, Karen, 2007. "Economy-wide and distributional impacts of an oil price shock on the south African economy," Policy Research Working Paper Series 4354, The World Bank.
- Taryn Dinkelman & Farah Pirouz, 2002. "Individual, Household And Regional Determinants Of Labour Force Attachment In South Africa:," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 865-891, 06.
- L Edwards, 2001. "Globalisation And The Skills Bias Of Occupational Employment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 69(1), pages 40-71, 03.
- Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001.
"The Beveridge curve, unemployment and wages in the OECD from the 1960s to the 1990s - preliminary version,"
LSE Research Online Documents on Economics
20113, London School of Economics and Political Science, LSE Library.
- Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001. "The Beveridge Curve, Unemployment and Wages in the OECD from the 1960s to the 1990s - Preliminary Version," CEP Discussion Papers dp0502, Centre for Economic Performance, LSE.
- A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
- Go, Delfin S. & Kearney, Marna & Robinson, Sherman & Thierfelder, Karen, 2005. "An Analysis of South Africa's Value Added Tax," Policy Research Working Paper Series 3671, The World Bank.
- Richard Harris, 1983.
"Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition,"
524, Queen's University, Department of Economics.
- Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
- D. Boccanfuso & F. Cabral & F. Cissé & A. Diagne & L. Savard, 2003. "Pauvreté et distribution de revenus au Sénégal: une approche par la modélisation en équilibre général calculable micro-simulé," Cahiers de recherche 0333, CIRPEE.
- Morné Oosthuizen & Haroon Bhorat, 2005. "The Post-Apartheid South African Labour Market," Working Papers 05093, University of Cape Town, Development Policy Research Unit.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4871. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.