IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/gprg-wps-015.html
   My bibliography  Save this paper

How Flexible are Wages in Response to Local Unemployment in South Africa?

Author

Listed:
  • Geeta Kingdon
  • John Knight

Abstract

It is commonly claimed that the South African labor market is unusually inflexible owing to the strength of the unions and the system of centralized collective bargaining. One aspect of labor market inflexibility concerns the responsiveness of wages to local unemployment. Examining this spatial relationship, we find that the elasticity of wages to local unemployment rates in South Africa is -0.1, similar to that found in other countries, including the US and the UK. This is striking because South Africa has a national unemployment rate of over 30%. We find that the wage curve elasticity persists over a much wider range of unemployment rates than in OECD countries, implying that unemployment in South Africa can have a large impact on wages.

Suggested Citation

  • Geeta Kingdon & John Knight, 2005. "How Flexible are Wages in Response to Local Unemployment in South Africa?," Economics Series Working Papers GPRG-WPS-015, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:gprg-wps-015
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:a2202130-5947-48ff-8e09-4aaecab459ec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, April.
    2. Anne Case & Angus Deaton, 1999. "School Inputs and Educational Outcomes in South Africa," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 1047-1084.
    3. J D Lewis, 2002. "Promoting Growth and Employment in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(4), pages 338-358, March.
    4. David G. Blanchflower, 1997. "Changes Over Time in Union Relative Wage Effects in Great Britain and the United States," NBER Working Papers 6100, National Bureau of Economic Research, Inc.
    5. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    6. van der Meulen Rodgers, Yana & Nataraj, Sita, 1999. "Labor Market Flexibility in East Asia: Lessons from Taiwan," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 51-69, October.
    7. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
    8. Pencavel, John, 1994. "British Unemployment: Letter from America," Economic Journal, Royal Economic Society, vol. 104(424), pages 621-632, May.
    9. Robert E. Hall, 1970. "Why Is the Unemployment Rate So High at Full Employment?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 1(3), pages 369-410.
    10. Moll, Peter, 1996. "Compulsory Centralization of Collective Bargaining in South Africa," American Economic Review, American Economic Association, vol. 86(2), pages 326-329, May.
    11. repec:bla:scandj:v:95:y:1993:i:2:p:245-48 is not listed on IDEAS
    12. Banerjee, Biswajit, 1983. "The Role of the Informal Sector in the Migration Process: A Test of Probabilistic Migration Models and Labour Market Segmentation for India," Oxford Economic Papers, Oxford University Press, vol. 35(3), pages 399-422, November.
    13. repec:fth:prinin:343 is not listed on IDEAS
    14. Carruth, Alan & Oswald, Andrew, 1987. "Wage Inflexibility in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 59-78, February.
    15. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    16. Moll, Peter G, 1996. "The Collapse of Primary Schooling Returns in South Africa 1960-90," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(1), pages 185-209, February.
    17. J. B. Knight, 1982. "The Nature of Unemployment in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 50(1), pages 1-7, March.
    18. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
    19. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
    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. Peter Nijkamp & Jacques Poot, 2005. "The Last Word on the Wage Curve?," Journal of Economic Surveys, Wiley Blackwell, vol. 19(3), pages 421-450, July.
    2. Wouter Vermeulen & J. van Ommeren, 2006. "Compensation of regional unemployment in housing markets," CPB Discussion Paper 57, CPB Netherlands Bureau for Economic Policy Analysis.
    3. Iara, Anna & Traistaru, Iulia, 2004. "How flexible are wages in EU accession countries?," Labour Economics, Elsevier, vol. 11(4), pages 431-450, August.
    4. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    5. Kåre Johansen, 2002. "Regional Wage Curves Empirical Evidence from Norway," Working Paper Series 0302, Department of Economics, Norwegian University of Science and Technology.
    6. Jens Suedekum, 2005. "Increasing returns and spatial unemployment disparities," Papers in Regional Science, Wiley Blackwell, vol. 84(2), pages 159-181, June.
    7. Ilias Livanos, 2010. "The Wage-Local Unemployment Relationship in a Highly Regulated Labour Market: Greece," Regional Studies, Taylor & Francis Journals, vol. 44(4), pages 389-400.
    8. Morrison, Philip S. & Papps, Kerry L. & Poot, Jacques, 2006. "Wages, employment, labour turnover and the accessibility of local labour markets," Labour Economics, Elsevier, vol. 13(5), pages 639-663, October.
    9. Bill Collier, 2000. "The UK Wage Curve: New Evidence from the British Household Panel Survey," Studies in Economics 0010, School of Economics, University of Kent.
    10. Cameron, G. & Muellbauer, J., 1999. "Earnings, Unemployment, and Housing: Evidence from a Panel of British Regions," Economics Papers 1999-w7, Economics Group, Nuffield College, University of Oxford.
    11. Víctor M. Montuenga‐Gómez & José M. Ramos‐Parreño, 2005. "Reconciling the Wage Curve and the Phillips Curve," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 735-765, December.
    12. Bratsberg, Bernt & Turunen, Jarkko, 1996. "Wage curve evidence from panel data," Economics Letters, Elsevier, vol. 51(3), pages 345-353, June.
    13. Gucciardi, Gianluca, 2014. "The Italian wage curve reloaded: Does occupation matter?," Economics Discussion Papers 2014-44, Kiel Institute for the World Economy (IfW Kiel).
    14. Gavin Cameron & John Muellbauer, 2001. "Earnings, unemployment, and housing in Britain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 203-220.
    15. Deller, Steven C., 2009. "Wages, Rent, Unemployment and Amenities," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(2), pages 1-14.
    16. Ammermueller, Andreas & Kuckulenz, Anja & Zwick, Thomas, 2009. "Aggregate unemployment decreases individual returns to education," Economics of Education Review, Elsevier, vol. 28(2), pages 217-226, April.
    17. Inmaculada Garcia-Mainar & Victor Montuenga-Gomez, 2003. "The Spanish Wage Curve: 1994-1996," Regional Studies, Taylor & Francis Journals, vol. 37(9), pages 929-945.
    18. Hynninen, Sanna-Mari, 2009. "Is there a wage curve for the highly educated?," ISER Working Paper Series 2009-17, Institute for Social and Economic Research.
    19. Wouter Vermeulen & Jos Van Ommeren, 2009. "Compensation of Regional Unemployment in Housing Markets," Economica, London School of Economics and Political Science, vol. 76(301), pages 71-88, February.
    20. Buscher, Herbert S., 2003. "Gibt es eine Lohnkurve in den neuen Bundesländern? (Is there a wage curve in eastern German?)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 461-475.

    More about this item

    Keywords

    Wages; Unemployment; Wage Curve; South Africa;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - 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:oxf:wpaper:gprg-wps-015. 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: Anne Pouliquen (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.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.