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Search, Transport Costs, and Labor Markets in South Africa

Author

Listed:
  • Kishan Shah

    (Center for International Development at Harvard University)

  • Federico Sturzenegger

Abstract

South Africa’s labor market exhibits a unique equilibrium with one of the highest unemployment rates in the world and yet a low level of informal employment. The unemployment rate has remained high and persistent over recent decades, in spite of the formal demise of the apartheid regime and subsequent transition to democracy in 1994. This paper uses a matching model of the labor market to argue that spatial considerations combined with low productivity of informal work may be responsible for such an outcome. Spatial dispersion inherited from the apartheid regime thins the labor market, creating exclusion and perpetuating spatial segregation. In most developing countries, the result would be higher employment in informal or own account employment. However, with low productivity in the informal sector, the high rate of exclusion shows itself in higher unemployment rates instead. Transportation costs and housing deregulation may become key factors in improving the working of the labor market in South Africa especially if it is not possible to raise informal productivity.

Suggested Citation

  • Kishan Shah & Federico Sturzenegger, 2023. "Search, Transport Costs, and Labor Markets in South Africa," Growth Lab Working Papers 195, Harvard's Growth Lab.
    • Handle: RePEc:glh:wpfacu:195
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    File URL: https://growthlab.cid.harvard.edu/files/growthlab/files/2022-10-cid-fellows-wp-142-south-africa-labor-transport.pdf
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    References listed on IDEAS

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    1. repec:pri:cheawb:case_ardington_hosegood_nber_w13442_oct07 is not listed on IDEAS
    2. repec:pri:rpdevs:case_ardington_hosegood_nber_w13442_oct07 is not listed on IDEAS
    3. Victoria Hosegood & Anne Case & Cally Ardington, 2009. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 22-48, January.
    4. Andrew Kerr, 2017. "Tax(i)ing the Poor? Commuting Costs in South African Cities," South African Journal of Economics, Economic Society of South Africa, vol. 85(3), pages 321-340, September.
    5. Andre Hofmeyr, 2010. "Social Networks And Ethnic Niches: An Econometric Analysis Of The Manufacturing Sector In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 78(1), pages 107-130, March.
    6. repec:pri:cheawb:case_ardington_hosegood_nber_w13442_oct07.pdf is not listed on IDEAS
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    Keywords

    South Africa; labor markets;

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