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South Africa: Labor Market Dynamics and Inequality

Author

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  • Rahul Anand
  • Siddharth Kothari
  • Naresh Kumar

Abstract

This paper analyzes the determinants of high unemployment in South Africa by studying labor market dynamics using individual level panel data from the Quarterly Labor Force Survey. While prior work experience and gender are found to be important determinants of the job-finding rate, education attainment and race are important determinants of the job-exit rate. Using stock-flow equations, counterfactual exercises are conducted to quantify the role of these different transition rates on unemployment. The paper also explores the contribution of unemployment towards inequality. Reducing unemployment is found to be important for reducing inequality – estimates suggest that a 10 percentage point reduction in unemployment lowers the Gini coefficient by 3 percent. Achieving a similar reduction solely through transfers would require a 40 percent increase in government transfers.

Suggested Citation

  • Rahul Anand & Siddharth Kothari & Naresh Kumar, 2016. "South Africa: Labor Market Dynamics and Inequality," IMF Working Papers 2016/137, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/137
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    References listed on IDEAS

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    1. Abhijit Banerjee & Sebastian Galiani & Jim Levinsohn & Zoë McLaren & Ingrid Woolard, 2008. "Why has unemployment risen in the New South Africa?1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(4), pages 715-740, October.
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    6. Andrew Kerr & Martin Wittenberg & Jairo Arrow, 2014. "Job Creation and Destruction in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 82(1), pages 1-18, March.
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    9. Philippe Burger, 2015. "Wages, Productivity and Labour's Declining Income Share in Post-Apartheid South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 159-173, June.
    10. Jeremy R. Magruder, 2012. "High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 138-166, July.
    11. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    12. Ronald Leung & Marco Stampini & Desire Vencatachellum, 2014. "Does Human Capital Protect Workers against Exogenous Shocks? Evidence from Panel Data on South Africa during the 2008-2009 Crisis," South African Journal of Economics, Economic Society of South Africa, vol. 82(1), pages 99-116, March.
    13. James Levinsohn, 2008. "Two Policies to Alleviate Unemployment in South Africa," CID Working Papers 166, Center for International Development at Harvard University.
    14. Essers, Dennis, 2013. "South African labour market transitions during the global financial and economic crisis: Micro-level evidence from the NIDS panel and matched QLFS cross-sections," IOB Working Papers 2013.12, Universiteit Antwerpen, Institute of Development Policy (IOB).
    15. repec:ldr:wpaper:92 is not listed on IDEAS
    16. Rahul Anand & Mr. Roberto Perrelli & Boyang Zhang, 2016. "South Africa’s Exports Performance: Any Role for Structural Factors?," IMF Working Papers 2016/024, International Monetary Fund.
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    Cited by:

    1. Anda DAVID & Gibson MUDIRIZA & Joanna GROTTE & Ariane DE LANNOY & Murray LEIBBRANDT, 2023. "Developing a Youth Labour Market Index for South Africa at the sub-national level," Working Paper ba3e7ae3-f112-470b-baa9-9, Agence française de développement.
    2. Mr. Montfort Mlachila & Tlhalefang Moeletsi, 2019. "Struggling to Make the Grade: A Review of the Causes and Consequences of the Weak Outcomes of South Africa’s Education System," IMF Working Papers 2019/047, International Monetary Fund.
    3. Mohimont, Jolan, 2022. "Welfare effects of business cycles and monetary policies in a small open emerging economy," Journal of Economic Dynamics and Control, Elsevier, vol. 136(C).
    4. Jacobus Johannes de Jongh, 2019. "Understanding the Drivers of Long-Term Youth Unemployment: Micro-Level Evidence from South Africa," Proceedings of International Academic Conferences 9912297, International Institute of Social and Economic Sciences.

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