Research Articles (Economics)

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Industrialisation and the decline of the coastal cities in South Africa: A neglected dimension
(Development Southern Africa, 1990-05) Roux, A.D.; Black, A.D.
Empirical evidence points to a mismatch between the growth of population and the growth of manufacturing activity among the metropolitan centres of South Africa. While the coastal metropoles lag behind the PWV and certain secondary cities and towns in terms of manufacturing growth, the opposite applies to urbanization. Various market failures and policy-induced distortions may have contributed to the relatively poor performance of manufacturing in the coastal cities. Until such time as these distortions have been completely removed by suitable changes to government policy, temporary subsidies to offset the disadvantages of the coastal areas may be advisable. © 1990, Taylor & Francis Group, LLC. All rights reserved.
Reflecting on Racial Discrimination in the Post-Apartheid South African Labour Market
(University if Cape Town, 2004-12) Naidoo, Karmen; Stanwix, Ben; Yu, Derek
During the 20th century, South Africa’s economy became increasingly ordered and controlled along racial lines. Since the official demise of apartheid in 1994, the State has implemented various policies aimed at redress. In this paper we use three sets of household surveys (1994, 2001 and 2011) to provide a picture of wage discrimination in post-apartheid South Africa, after almost twenty years of democratic rule. Evidence suggests that discrimination in the labour market has decreased since 1994 but unsurprisingly remains a determinant of differential earnings between race groups. We also use a Re-centred Influence Function (RIF) approach to decompose the impact of discrimination across the wage distribution, and we track this over time. This allows us to make observations about the relationship between discrimination and wage levels: Discrimination appears to decrease with higher wages, and some of the largest decreases in measured discrimination are evident at higher wage levels.
Educational attainment and intergenerational social mobility in SA
(World Bank Group, 2005) Yu, Derek; Louw, Megan; van der Berg, Servaas
To a large degree, the notoriously high levels of income inequality in\nSouth Africa have their roots in differential access to wage-earning opportunities in the labour market, which in turn are influenced by family background. This paper therefore investigates the role that parents’ education plays in children’s human capital accumulation. The study analyses patterns of educational attainment in South Africa during the period 1970-2001, asking whether intergenerational social mobility has improved. It tackles the issue in two ways, combining extensive descriptive analysis of progress in educational attainment with more a formal evaluation of intergenerational social mobility using indices constructed by Dahan and Gaviria (2001) and Behrman, Birdsall and Szekely (1998). Both types of analysis indicate that intergenerational social mobility within race groups improved over the period, with the indices suggesting that South African children are currently better able to take advantage of educational opportunities than the bulk of their peers in comparable countries. However, significant racial barriers remain in the quest to equalise educational opportunities across the board for South African children.
Trends in poverty and inequality since the political transition
(Elsevier, 2006) Yu, Derek; Louw, Megan; Burger, Rulof
Using a constructed data series and another data series based on the All Media and Products surveys (AMPS), this paper explores trends in poverty and income distribution over the post-transition period. To steer clear of an unduly optimistic conclusion, assumptions are chosen that would tend to show the least decline in poverty. Whilst there were no strong trends in poverty for the period 1995 to 2000, both data series show a considerable decline in poverty after 2000, particularly in the period 2002-2004. Poverty dominance testing shows that this decline is independent of the poverty line chosen or whether the poverty headcount, the poverty ratio or the poverty severity ratio are used as measure. We find likely explanations for this strong and robust decline in poverty in the massive expansion of the social grant system as well as possibly in improved job creation in recent years. Whilst the collective income of the poor (using our definition of poverty) was only R27 billion in 2000, the grants (in constant 2000 Rand values) have expanded by R22 billion since. Even if the grants were not well targeted at the poor (and in the past they have been), a large proportion of this spending must have reached the poor, thus leaving little doubt that poverty must have declined substantially.
Wage trends in post-apartheid South Africa: Constructing an earnings series from household survey data
(South African Reserve Bank, 2006) Yu, Derek; Burger, Rulof
Recent research on South African labour-market trends has suggested that workers have, on average, experienced a substantial decrease in their real wage earnings in the post-apartheid era. This paper will show that this claim is based on choosing datasets on either side of Statistics South Africa’s changeover from the October Household Survey (OHS) to the Labour Force Survey (LFS), which caused a discontinuous and inexplicably large drop in average earnings. By using all the household datasets after 1994, one can attempt to identify and address the sources of data inconsistencies across surveys in order to construct a more comparable earnings time series. Taking account of the inconsistencies in questionnaire design and the presence of outliers, it is possible to construct a fairly stable earnings series for formal-sector employees.
Forecasting volatility in sub-Saharan Africa’s commodity markets
(Business Perspectives, 2007) Ocran, Matthew Kofi; Biekpe, Nicholas
Using spot prices from eighteen commodities traded by most Sub-Saharan African countries, this paper evaluates the out-of-sample volatility forecasting efficiency of seven models. The models evaluated included random walk, simple regression and five models from the ARCH family of models. Standard loss functions are used to examine the relative performance of the competiting models. The non-ARCH family of models consistently outperformed the ARCH family of models on all the evaluation criteria. Of the two non-ARCH family of models, the autoregressive model was superior. The results of the study suggest that government agencies in Sub-Saharan Africa that manage inflows from commodity markets can use autoregressive models in predicting volatility of inflows. Again, risk management strategies will be best served with autoregressive models.
A series of national accounts-consistent estimates of poverty and inequality in South Africa
(Stellenbosch University, 2007) Yu, Derek; van der Berg, Servaas; Burger, Ronelle
This paper makes a unique contribution to the South African literature in combining data from an alternative source of household survey data – the All Media and Product Survey (AMPS) – with national accounts income trends for this country, in the recent tradition of research on the world distribution of income performed by Bhalla (2002), Karshenas (2003), Bourguignon and Morrisson (2002), Sala-i-Martin (2002a; 2002b), and Quah (2002), amongst others. Its usefulness lies in arriving at alternative estimates of post-transition poverty and inequality that are consistent with the story that national accounts and other official data collectively tell us about the path of the South African economy during the post-transition period. While the method of scaling survey distribution data by national accounts means is somewhat controversial, it is not clear that the distributional trends obtained using the post-transition sets of either the IESs or the Population Censuses are more reliable, given serious deficiencies in both sources of data. Adjusted distributions yield lower levels of poverty and a stronger decline in poverty during the second half of the period than the figures obtained from the raw AMPS data. While the levels of poverty obtained using adjusted income distributions are artificially low, the derived downward trend is supported by a number of official data sources.
Crime and HIV/AIDS in the Western Cape: business support organizations and business owners' perceptions
(Academic Journals, 2007) Isaacs, Eslyn; Friedrich, Christian
Economic growth will be severely curtailed if crime and HIV/AIDS is not effectively dealt with. Despite the fact that the business support organizations and the SMME owners are dissatisfied with the crime situation, the government reports that it is showing a decreasing trend. The research shows that 92% of the respondents are of the opinion that crime negatively affects small and medium enterprises and these owners are spending between $21 and $87 per annum on crime prevention. It was surprising when 52% of the owners mentioned that they have no measures in place to combat crime, whilst 17% have a double inventory and cash control system in place. A further 14% reported that they do a thorough background check before appointing new employees. Sixty percent of respondents believed that unemployment and low self-esteem (15%) are consequences of crime and it was therefore not surprising when 30% indicated that job creation should receive a priority; another 30% believed improved police visibility and 23% was of the opinion that youth programmes and a further 17% suggested that the prosecution system should be more effective. Hundred percent (100%) of the business owners indicated that they do not have a HIV/AIDS policy. Eighty eight percent of the respondents were of the opinion that HIV/AIDS have a negative impact on the small and medium enterprises. Fifty four percent of the respondents believed that HIV/AIDS reduces the workforce and forty six percent opinioned that it decreases the purchasing power of the affected employees. Fifty four percent of the respondents were of the opinion that awareness programmes; 23% thought treatment programmes and it was surprising when 20% of the respondents reported that they do not know what can be done to reduce the HIV/AIDS situation.
Interrelations among stock prices of South Africa and the United States and the rand/dollar exchange rate
(Stellenbosch University, 2007) Ocran, Matthew Kofi
This paper seeks to examine the dynamic short-term causal relations and the long-term equilibrium relations between the two major financial assets, stock prices of the US and South Africa and the rand/US$ exchange rate. The study uses a mixed bag of time series approaches such as cointegration, Granger causality, impulse response functions and forecasting error variance decompositions. The study identifies a long-run relationship among the rand/US$ exchange rate and the stock prices of South Africa and the United States. It was also observes that there is a causal relationship from the stocks in the United States to the rand/US$ exchange rate. In the short run however, the interactions among the variables are quite modest. The result of the study has implications for investors, policy makers and researchers.
Wage trends in post-apartheid South Africa: Constructing an earnings series from household survey data
(University of Cape Town, 2007) Yu, Derek; Burger, Rulof
This paper examines South African wage earnings trends using all the available post-1994 household survey datasets. This allows us to identify and address the sources of data inconsistencies across surveys in order to construct a more comparable earnings time series. Taking account of the inconsistencies in questionnaire design and the presence of outliers, we find that it is possible to construct a fairly stable earnings series for formal sector employees. We find that claims that workers have on average experienced a substantial decrease in their real wage earnings in the post-apartheid era is based on choosing datasets on either side of Statistics South Africa’s changeover from October Household Surveys (OHS) to the more consistent Labour Force Surveys (LFS), which caused a discontinuous and inexplicably large drop in average earnings. The data actually show an increase in real wage earnings in the post-transition period for formal sector employees, and does not provide strong evidence of decreasing wages in the informal economy. The paper also investigates changes in the distribution of earnings, as well as mean earnings trends by population group, gender and skill category.
Alternative definitions of informal sector employment in South Africa
(Stellenbosch University, 2008) Yu, Derek; Essop, Hassan
Before the introduction of the Quarterly Labour Force Survey (QLFS) in 2008, Statistics South Africa (Stats SA) has been using the same methodology to derive the informal sector employment throughout the years, focusing on the enterprise registration status to classify workers (which include both self-employed and employees) as either formal or informal sector workers. Although there are difficulties with attempting to provide any consistent trend data (Yu, 2007 & Essop & Yu, 2008), it is generally accepted that informal sector employment grew relatively more rapidly in the late 1990s, and then stabilized at about 2 million in the early 2000s before it increased (albeit more slowly) again since 2005. Nonetheless, recent papers by Devey, Skinner & Valodia (2006) as well as Heintz & Posel (2008) argue that the current classifications used by Stats SA hide a significant degree of informality in the formal economy, as some formal jobs are characterized by conditions that are typical of informal work. Therefore, they propose alternative definitions of informal sector employment, focusing on worker characteristics instead of enterprise characteristics. This paper aims to address the reliability or otherwise of these recent approaches, as well as to suggest better ways to define informal sector employment.
The South African informal sector (1997 – 2006)
(Stellenbosch University, 2008) Yu, Derek; Essop, Hassan
According to the 2006 September Labour Force Survey, approximately 22% of the employed (excluding domestic workers and agricultural employment) are engaged in informal sector activities as their main work to sustain themselves and their dependents. Given the large size of the informal sector in relation to the formal sector, it is imperative to understand the dynamics and trends within the informal sector. This paper provides a detailed quantitative descriptive analysis of the South African informal sector between 1997 and 2006 using the October Household Survey and the Labour Force Survey data, adding to the work on informal markets done by authors such as Devey, Skinner & Valodia (2003, 2006a, 2006b), Muller (2003) and Muller & Posel (2004). Such an analysis could not only enhance the informal sector literature currently available, but also increase the depth of analysis available to policy makers.
What explains the academic success of second-year economics students? An exploratory analysis
(Stellenbosch University, 2008) Yu, Derek; Horn, Pietie; Jansen, Ada
The factors influencing academic success of first-year Economics students have received much attention from researchers. Very little attention, however, has been given to the determinants of success of senior Economics students. In the USA, Graunke and Woosley (2005: 367) indicate that college sophomores (second years) face academic difficulties, but this receives little attention in the literature. Economics is an elective subject for second-year students at Stellenbosch University. The academic performance of the second-year students has shown a decline, as compared to the first-year Economics performance and the faculty’s average performance. An observed phenomenon at Stellenbosch University is the poor attendance of lecture and tutorials by second year students, some of the factors than can perhaps explain why students perform poorly. This phenomenon may be explained in part by second year students losing interest in academic activities, focusing on other social commitments. This study investigates the academic success of second-year Economics students. It adds to the existing literature on the factors affecting the academic success of Economics students by focusing on the second-year students (a much neglected group in empirical studies, particularly in South Africa). The empirical analyses confirm some of the existing findings in the literature, namely that lecture and tutorial attendance are important contributors to academic success. We also find that as students progress to Economics at the second-year level, their performance in individual matriculation subjects is less relevant, except for those students who had taken Additional Mathematics. However, the matriculation aggregate mark is significant in explaining the academic performance, in a non-linear way. An important finding is that non-White students tend to perform more poorly in essay writing (one of the components of the course mark in the second year) than White students.
How invariant is South African child poverty to the choice of equivalence scale or poverty measure?
(Stellenbosch University, 2008) Yu, Derek; Streak, Judith
This paper offers evidence on the sensitivity of child poverty in South Africa to changes in the Adult Equivalence Scale (AES) and updates the child poverty profile based on the Income and Expenditure Survey 2005/06. Setting the poverty line at the 40th percentile of households calculated with different AESs the scope and composition of child poverty are found to be relatively insensitive to the scale used. The rankings of children of different ages, girls versus boys, racial groupings and children living in rural versus urban areas are unaffected by choice of AES, although some provincial rankings on the poverty headcount measure are. The proportions of children and households ‘correctly’ identified as poor for the full range of scales is extremely high. These findings support the argument of Woolard & Leibbrandt (2006) that it may be appropriate for profiling poverty in South Africa to use a poverty line based on a per capita welfare measure. For the construction of the child poverty profile, per capita income is used as the welfare indicator with the poverty line set at the 40th 1 *Child Youth Family and Social Development, Human Sciences Research Council, South Africa; **Department of Economics, Stellenbosch University South Africa. percentile of household. The profile suggests that poverty amongst children is more extensive than amongst the population or adults even after the massive injection of transfers into households with poor children through the child support grant. The child poverty headcount, depth and severity are all highest amongst children age 0-4 and lowest amongst those aged 15-17, who are not yet beneficiaries of the grants. They are also highest amongst African and Coloured children. Large variations across provinces remain.
The comparability of labour force survey (LFS) and quarterly labour force survey (QLFS)
(Stellenbosch University, 2009) Yu, Derek
Statistics South Africa (Stats SA) has been collecting labour market data since 1993 with the October Household Survey (OHS), which was conducted annually between 1993 and 1999, as well as the Labour Force Survey (LFS), which was a biannual survey introduced in 2000 to replace the OHS. In March 2005, consultants from the International Monetary Fund (IMF) were appointed to revise all aspects of the LFS. All documents, processes and procedures relating to the LFS were reviewed, before a report on the findings was presented to Stats SA in June 2005. At the end, it was decided to re-engineer the LFS, and this took place in October 2005. Moreover, consultants were appointed in 2006 to help improve the survey questionnaire, sampling and weighting, data capture and processing systems. Eventually, Stats SA came up with a decision that the LFS would take place on a quarterly basis from 2008, i.e., the Quarterly Labour Force Survey (QLFS) was introduced to replace the LFS.
Poverty and inequality trends in South Africa using different survey data
(Stellenbosch University, 2010) Yu, Derek
There is an abundance of literature adopting the monetary approach (i.e., using per capita income or expenditure variables) to derive poverty and inequality trends for South Africa since the transition. The most commonly used data sets used for these analyses are the censuses and the Income Expenditure Surveys (IESs) conducted by Statistics South Africa (Stats SA). However, in some recent studies, alternative data sources were used, namely the All Media Products Survey (AMPS) by the South African Advertising Research Foundation (SAARF), as well as the National Dynamic Income Study (NIDS), which is conducted by Southern African Labour and Development Research Unit (SALDRU). Some of the data sets are problematic in a particular year or in more than one year, which in turn makes the comparison of poverty and inequality results across the years difficult. Examples of these problems are as follows: the serious decline of income and expenditure between the 1995 and 2000 IES; the high proportion of households with zero or unspecified income in the censuses; too few household expenditure bands in the General Household Surveys (GHSs). In addition, in the various studies mentioned above, different poverty lines were used in the poverty analysis, with the most commonly used poverty line values being R250 per month in 1996 Rand, US$1 a day, US$2 a day, as well as R211 per month and R322 per month in 2000 Rand (i.e., the two official poverty lines proposed by Woolard and Leibbrandt (2006).
Investigating the significance of the 2008 Matric curriculum on first-year Economics performance
(UNISA Press, 2011) Dlomo, Z.; Jansen, A.; Moses, M.; Yu, Derek
The academic success of first-year Economics students has been the focus of many South African studies in Economic Education. Many used the last school examination (Matric) results as a proxy for students’ academic ability. In 2008 a new Matric curriculum was introduced. Given various changes in the curriculum, the question arises as to whether Matric results are still significant in explaining academic performance, and whether the matriculants from the 2008 curriculum perform differently. Factors such as the students’ time spent on studying outside lectures, their work status, and the impact of using an English textbook on the performance of non-English speakers are also investigated. A two-step Heckman model is applied to investigate the performance of Economics students at the University of the Western Cape, South Africa. The main results are that students who matriculated under the new curriculum, worked part-time, spent less time studying, and are not English-speaking perform worse.
Factors explaining the academic success of second-year economics students: an exploratory analysis
(Blackwell Publishing Ltd, 2011) Horn, Petronella; Jansen, Ada; Yu, Derek
Factors influencing the academic success of first-year economics students have been intensely researched. Lecture and tutorial attendance, age, gender, as well as matriculation results have been identified as significant in explaining academic performance. The academic success of senior students, however, has received less attention in South Africa. This paper presents the findings of an investigation into the academic performance of second-year economics students at Stellenbosch University. Using a Heckman two-step model, the study analyses whether the factors explaining first-year academic success are applicable in the second year or if other factors are relevant. The results suggest that most matriculation subjects become statistically insignificant for second-year students, whereas lecture and tutorial attendance remain important contributors to academic success. Furthermore, academic performance in the first year is an important determinant of success in the second year.
Challenges for quality primary education in Papua New Guinea — a case study
(Hindawi Publishing Corporation, 2011) Rena, Ravinder
There is an urgent need to reform the educational system to achieve universal primary education in Papua New Guinea (PNG). Even after 35 years of independence, PNG has been struggling to educate an estimated 2 million elementary- and primary-aged children and faces numerous challenges in providing Education for All (EFA). This study was conducted in four primary schools of Buma Yong area of Lae district ofMorobe Province, PNG. The study revealed that the quality of education has been deteriorated over the past few decades. Many schools in PNG do not have classrooms, teachers, and basic facilities. As a result, the children are losing interest in going to school. The children dropped out of school so as to assist their families in the household and agricultural activities. It also reveals that the dropout rate of girls is more than that of the boys due to the gender disparity in the country. The study recommended that budgetary allocations should be increased so as to improve the infrastructural facilities and encourage the children to attend primary school and thus achieve the Millennium Development Goal/Education For All in PNG.
Impact of WTO policies on developing countries: issues and perspectives
(Ottawa United Learning Academy & Denfar Transnational Development, 2012) Rena, Ravinder
About two thirds of the WTO’s around 150 members are developing countries. They play an increasingly important and active role in the WTO because of their numbers, because they are becoming more important in the global economy, and because they increasingly look to trade as a vital tool in their development efforts. An attempt is made in this paper to examine whether the WTO policies have positive or negative effect on the trade of developing countries. The paper further discusses that the Doha Round of Talk is a myth, a fiction, or is it a reality. Can the spirit of Doha, which launched a new round of negotiations and work with an explicit pledge to deliver development-friendly results, be redeemed or not? Finally, it analyses the special differential treatment (SDT) for developing countries.

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