IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/202072.html
   My bibliography  Save this paper

A Fiscus for Better Economic and Social Development in South Africa

Author

Listed:
  • Francois J. Stofberg

    (Economist, Efficient Group)

  • Jan H. van Heerden

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Heinrich R. Bohlmann

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

Abstract

After showing that the bulk of government expenditure is unproductive, we consider the impact of an alternative fiscal policy mix in South Africa. The alternative suggests freezing the real government wage bill for five years and using the savings generated by this decision to increase spending on a specific, productive and wealth-creative expenditure item, aggregate investments. By indirectly contributing to greater levels of investments we show how government can generate better levels of economic performance and social development. To analyse the economic consequences of the suggested fiscal policy mix we use TERM-SA a dynamic, regional computable general equilibrium model of South Africa. We also add additional features to provide more accurate and detailed results. Our results show that a wage freeze can increase both real GDP (5.9%) and employment (456,00 jobs) in the long-term.

Suggested Citation

  • Francois J. Stofberg & Jan H. van Heerden & Heinrich R. Bohlmann, 2020. "A Fiscus for Better Economic and Social Development in South Africa," Working Papers 202072, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202072
    as

    Download full text from publisher

    File URL: http://www.up.ac.za/media/shared/61/WP/wp_2020_72.zp193050.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 24(58), pages 349-402.
    2. H. Okudaira & M. Takizawa & K. Tsuru, 2013. "Employment protection and productivity: evidence from firm-level panel data in Japan," Applied Economics, Taylor & Francis Journals, vol. 45(15), pages 2091-2105, May.
    3. Jooste, Charl & Liu, Guangling (Dave) & Naraidoo, Ruthira, 2013. "Analysing the effects of fiscal policy shocks in the South African economy," Economic Modelling, Elsevier, vol. 32(C), pages 215-224.
    4. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," NBER Working Papers 12860, National Bureau of Economic Research, Inc.
    5. Mabugu, Ramos & Robichaud, Veronique & Maisonnave, Helene & Chitiga, Margaret, 2013. "Impact of fiscal policy in an intertemporal CGE model for South Africa," Economic Modelling, Elsevier, vol. 31(C), pages 775-782.
    6. Francois J. Stofberg & Jan H. van Heerden, 2015. "The Short Term Economic Impact of Levying E-Tolls on Industries," Working Papers 201527, University of Pretoria, Department of Economics.
    7. James Alm & Abel Embaye, 2010. "Explaining The Growth Of Government Spending In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 78(2), pages 152-169, June.
    8. James A Giesecke & John R Madden, 2006. "Uncovering the Factors behind Comparative Regional Economic Performance: A Dynamic CGE Approach," Centre of Policy Studies/IMPACT Centre Working Papers g-165, Victoria University, Centre of Policy Studies/IMPACT Centre.
    9. Michèle Belot & Jan Boone & Jan Van Ours, 2007. "Welfare‐Improving Employment Protection," Economica, London School of Economics and Political Science, vol. 74(295), pages 381-396, August.
    10. Pedro R. D. Bom & Jenny Ligthart, 2008. "How Productive is Public Capital? A Meta-Analysis," CESifo Working Paper Series 2206, CESifo.
    11. Erwin L. Corong & J. Mark Horridge, 2012. "PHILGEM: A SAM-based Computable General Equilibrium Model of the Philippines," Centre of Policy Studies/IMPACT Centre Working Papers g-227, Victoria University, Centre of Policy Studies/IMPACT Centre.
    12. César Calderón & Enrique Moral‐Benito & Luis Servén, 2015. "Is infrastructure capital productive? A dynamic heterogeneous approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 30(2), pages 177-198, March.
    13. Honkatukia, Juha, 2013. "The VATTAGE Regional Model VERM - A Dynamic, Regional, Applied General Equilibrium Model of the Finn," Research Reports 171, VATT Institute for Economic Research.
    14. Berndt, Ernst R, 1976. "Reconciling Alternative Estimates of the Elasticity of Substitution," The Review of Economics and Statistics, MIT Press, vol. 58(1), pages 59-68, February.
    15. Mark Horridge, 2011. "The TERM model and its data base," Centre of Policy Studies/IMPACT Centre Working Papers g-219, Victoria University, Centre of Policy Studies/IMPACT Centre.
    16. Inchauste, Gabriela & Lustig, Nora & Maboshe, Mashekwa & Purfield, Catriona & Woolard, Ingrid, 2015. "The distributional impact of fiscal policy in South Africa," Policy Research Working Paper Series 7194, The World Bank.
    17. Z. R. Coetzee & K. Kwarada & W. Naude & J. Swanepoel, 1997. "Currency Depreciation, Trade Liberalisation and Economic Development 1," South African Journal of Economics, Economic Society of South Africa, vol. 65(2), pages 78-88, June.
    18. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Does Employment Protection Reduce Productivity? Evidence From US States," Economic Journal, Royal Economic Society, vol. 117(521), pages 189-217, June.
    19. Francois J. Stofberg & Jan H. van Heerden, 2015. "The Short Term Economic Impact of Levying E-Tolls on Industries," Working Papers 515, Economic Research Southern Africa.
    20. Wittwer, Glyn & Vere, David T. & Jones, Randall E. & Griffith, Garry R., 2005. "Dynamic general equilibrium analysis of improved weed management in Australia's winter cropping systems," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 49(4), pages 1-15.
    21. Mark Horridge, 2000. "ORANI-G: A General Equilibrium Model of the Australian Economy," Centre of Policy Studies/IMPACT Centre Working Papers op-93, Victoria University, Centre of Policy Studies/IMPACT Centre.
    22. Matthew Kofi Ocran, 2011. "Fiscal policy and economic growth in South Africa," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(5), pages 604-618, September.
    23. Akanbi, Olusegun Ayodele, 2013. "Macroeconomic effects of fiscal policy changes: A case of South Africa," Economic Modelling, Elsevier, vol. 35(C), pages 771-785.
    24. Gabriela Inchauste & Nora Lustig & Mashekwa Maboshe & Catriona Purfield & Ingrid Woolard, 2015. "Distributional Impact of Fiscal Policy in South Africa," Commitment to Equity (CEQ) Working Paper Series 1329, Tulane University, Department of Economics.
    25. Mark Horridge & Glyn Wittwer, 2006. "The Impacts of Higher Energy Prices on Indonesia’s and West Java’s Economies using INDOTERM, a Multiregional Model of Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 200607, Department of Economics, Padjadjaran University, revised Aug 2006.
    26. Stan du Plessis & Ben Smit, 2006. "Economic growth in South Africa since 1994," Working Papers 01/2006, Stellenbosch University, Department of Economics.
    27. Nicholas Odhiambo, 2015. "Government Expenditure and Economic Growth in South Africa: an Empirical Investigation," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(3), pages 393-406, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stofberg, F.J. & van Heerden, J.H. & Horridge, M. & Roos, L., 2022. "A fiscus for better economic and social development in South Africa," Conference papers 333392, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Li, Guangzhong & Fujiyama, Keishi & Wu, Cen & Zheng, Ying, 2024. "Employment protection, corporate governance, and labor productivity around the World," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    3. Bjuggren, Carl Magnus, 2018. "Employment protection and labor productivity," Journal of Public Economics, Elsevier, vol. 157(C), pages 138-157.
    4. Bottasso, Anna & Conti, Maurizio & Sulis, Giovanni, 2017. "Firm dynamics and employment protection: Evidence from sectoral data," Labour Economics, Elsevier, vol. 48(C), pages 35-53.
    5. Giuseppina Gianfreda & Giovanna Vallanti, 2017. "Informality and productivity: do firms escape EPL through shadow employment? Evidence from a regression discontinuity design," Working Papers 2017-01, Universita' di Cassino, Dipartimento di Economia e Giurisprudenza.
    6. Bjuggren, Carl Magnus, 2013. "The Effect of Employment Protection Rules on Firm Productivity - A Natural Experiment," HUI Working Papers 82, HUI Research, revised 30 Oct 2013.
    7. Maria De Paola & Roberto Nisticò & Vincenzo Scoppa, 2020. "Fertility Decisions And Employment Protection: The Unintended Consequences Of The Italian Jobs Act," Working Papers 202003, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    8. Igor Fedotenkov & Virmantas Kvedaras & Miguel Sanchez-Martinez, 2024. "Employment protection and labour productivity growth in the EU: skill-specific effects during and after the Great Recession," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 209-262, February.
    9. Stéphane Auray & Samuel Danthine & Markus Poschke, 2020. "Understanding the Determination of Severance Pay: Mandates, Bargaining, and Unions," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(3), pages 1073-1111, July.
    10. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-Provided Training: Quasi-Experimental Evidence from a Labour Market Reform," IZA Discussion Papers 12773, Institute of Labor Economics (IZA).
    11. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    12. Conti, Maurizio & Sulis, Giovanni, 2016. "Human capital, employment protection and growth in Europe," Journal of Comparative Economics, Elsevier, vol. 44(2), pages 213-230.
    13. Orsetta Causa & Mikkel Hermansen & Nicolas Ruiz, 2016. "The Distributional Impact of Structural Reforms," OECD Economics Department Working Papers 1342, OECD Publishing.
    14. repec:spo:wpmain:info:hdl:2441/65dh65gjnn96rqgo52mg09a1uu is not listed on IDEAS
    15. Amendola, Marco & Ciampa, Valerio & Germani, Lorenzo, 2024. "The distributional effects of labour market deregulation: Wage share and fixed-term contracts," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 328-338.
    16. Auray, Stéphane & Danthine, Samuel & Poschke, Markus, 2014. "Mandated versus Negotiated Severance Pay," IZA Discussion Papers 8422, Institute of Labor Economics (IZA).
    17. repec:hal:spmain:info:hdl:2441/65dh65gjnn96rqgo52mg09a1uu is not listed on IDEAS
    18. Michele Capriati & Valeria Cirillo & Marialuisa Divella, 2024. "Productivity slowdown across European regions: does non-standard work matter?," Regional Studies, Taylor & Francis Journals, vol. 58(9), pages 1687-1709, September.
    19. Nicolas Lepage-Saucier & Juliette Schleich & Etienne Wasmer, 2013. "Moving Towards a Single Labour Contract: Pros, Cons and Mixed Feelings," OECD Economics Department Working Papers 1026, OECD Publishing.
    20. Daniel Schwab, 2020. "Labor protection laws and the drain on productivity: Evidence from India," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 383-401, May.
    21. Juan J. Dolado & Salvador Ortigueira & Rodolfo Stucchi, 2016. "Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(4), pages 421-459, November.
    22. Mirella Damiani & Fabrizio Pompei & Andrea Ricci, 2011. "Temporary job protection and productivity growth in EU economies," Quaderni del Dipartimento di Economia, Finanza e Statistica 87/2011, Università di Perugia, Dipartimento Economia.

    More about this item

    Keywords

    Computable general equilibrium models; households; social accounting matrix; regional economics; policy modelling;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:202072. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rangan Gupta (email available below). General contact details of provider: https://edirc.repec.org/data/decupza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.