The growth,poverty and inequality nexus in South Africa: Cointegration and causality analysis

This study empirically established the long-run relationship and causality effects that exist between growth, poverty and inequality. The analysis was carried out on a panel of nine South African provinces from 1995 to 2012. To capture poverty and inequality in a broader context, two measures of poverty (income and non-income) and three measures of inequality (income, education and land) were adopted for the study. The results confirm that there is a long-run relationship between growth, poverty and inequality. Notable results from the causality tests suggest that growth does not promote equal distribution of income in society but as income distribution begins to equalise, economic growth rises. This is regarded as growth–inequality disconnect. The unidirectional causality, which runs from income poverty to income inequality, suggests that a rising level of income poverty will lead to falling income inequality in the society; likewise, income inequality increases as non-income poverty declines.     

Re-estimating gender differences in income in South Africa: The implications of equivalence scales

Most studies of poverty and inequality in South Africa measure individual welfare by deflating total household resources, such as income, by household size. This per-capita method makes no adjustments for the different consumption needs of children or for household economies of scale. However, in addition to being more likely to live in households where average per-capita household income is lower compared with men, we show that women in South Africa also live in significantly larger households which include more children. These gendered differences in household composition are driven to a large degree by low rates of co-residency between men and women. We therefore investigate how adjusting household resources for the presence of children and economies of scale affects measures of the gender gap in income.     

A comparison of poverty in South Africa's nine provinces

Poverty in South Africa varies greatly across the nine provinces. An accurate estimation of relative poverty shares is important because they serve as key indices for targeting social expenditure. In this article we test the robustness of provincial poverty rankings against changes in measurement methodology. In recent years, a large body of international literature has developed concerning the choice of an appropriate poverty line and the construction of more appropriate poverty measures. This article uses two of these recent developments ‐ the concept of a poverty critical range in place of a single poverty line and distribution‐sensitive decomposable poverty measures — to re‐examine provincial poverty. Results are checked across two recent national data sets.     

The challenge of growth,employment and poverty in the South African economy since democracy: an exploratory review of selected issues

The welfare challenges in post‐apartheid South Africa are best represented by the triumvirate of poverty, income inequality and unemployment. In turn, the one generally accepted mechanism for overcoming these challenges is for an economy to realise sustained levels of high economic growth. Herein lie the essential coordinates of this article. We attempt first to describe the post‐apartheid experience with economic growth and its determinants. Secondly, we describe the nature of the welfare challenges that the society faces in terms of poverty, income inequality and unemployment. Finally, and perhaps most critically, we explore the various constraints on economic growth that may be hindering the realisation of higher standards of living amongst the population.     

General Equilibrium Approach for Poverty Analysis: With an Application to Cameroon

Abstract: In this paper we use a computable general equilibrium model to study the impact of a trade shock and a tariff reform on household poverty for an archetype developing country. Unlike other studies, we present the income distribution of each household group as a Beta statistical distribution. In contrast to other studies, this paper presents the poverty lines as being endogenous. With this specification, the poverty line will change following a variation in relative prices. With the new distributions and poverty line, the poverty levels of the base year are compared with the ex‐post values. Foster, Greer and Thorbecke's (1984) poverty measures are used. We work with the Cameroon household survey data of 1995–96. We consider two scenarios. The first is a 30 percent fall in the world price of the country's export crop and the second is a reduction of 50 percent in the country's import tariffs. For the first simulation, results indicate a drop in all household incomes and a decrease in the poverty line. Unilateral trade liberalization also has negative consequences on all household incomes. As in the first simulation, the poverty line decreases with a unilateral trade liberalization. In the trade liberalization simulation, the poverty line effect counters the income effect in most cases analyzed. In the other simulation, the poverty line effect attenuates the decrease in the poverty measures.     

THE IMPACT OF HEALTH ON POVERTY: EVIDENCE FROM THE SOUTH AFRICAN INTEGRATED FAMILY SURVEY

This paper examines the impact of health status on poverty status, accounting for the endogeneity of health status. Using exogenous measures of health status from the South African Integrated Health Survey, we instrument for health status while allowing for covariation among the unobservables influencing both health and household poverty status. Health status, as captured by the body mass index, is shown to strongly influence poverty status. Households that contain more unhealthy individuals are 60 per cent more likely to be income poor than households that contain fewer unhealthy individuals, and this finding appears invariant to the choice of poverty line.     

Food Price Crisis,Poverty, and Inequality

This paper simulates how a doubling of food prices affects absolute poverty and the food‐price‐adjusted real income distribution. We assume unsubsidized world food prices in order to derive the cost of poverty deepening and poverty expansion. We also estimate the degree to which inequality increases if no measures are put in place to offset rising food prices. Both measures are vulnerability indicators useful for social policy planning. Our results show that low‐income countries experience dramatic increases in absolute poverty as a result of doubling food prices. Middle‐income countries experience the greatest decrease in absolute income, which contributes most to an increase in world income inequality. The paper estimates that the global dollar value of the absolute poverty gap ($1.25/day) has the potential to increase by 400%, with poverty deepening accounting for two thirds of the increase.     

城镇化中的社会保障制度建设：来自拉美国家的教训

拉美国家在历史上出现过经济高速增长和快速城市化的阶段,但是经济增长并没有解决贫困现象和缩小收入差距,出现了“增长性贫困”现象,而收入悬殊限制了经济的进一步增长。社保制度存在缺陷是导致拉美国家增长性贫困的主要原因之一：社保制度严重滞后于城市化进程,住房和就业困难,非正式就业较为普遍;养老保险计划的覆盖面较低,收入再分配难以进行;养老金管理成本居高不下,导致养老保险扩面难;社会保险与社会救助的比重失调,中产阶级成为社会保障制度的最大受益者;社保和教育机会的缺失,造成代际贫困的恶性循环。拉美国家这些教训为我国社保制度的完善提供了很好的借鉴。     

Concepts and Measures of Saving: Selected Issues for South Africa

South African household savings rates have been declining steadily over the last five decades, raising concerns that the population structurally under‐saves. Against the background of new saving‐enhancing policy initiatives, this paper asks to what extent the concern is founded, and whether the measurement of saving is really appropriate to guide economic policy. Comparing different macroeconomic concepts and measurements of saving, we show that the measure of saving in the national accounts (the residual between income and expenditure) understates the household savings rate compared to other measures. Specifically, an alternative measure from the balance sheets (the change in wealth) yields a significantly higher and non‐declining figure. While households have not been “putting aside” their incomes, they have nevertheless grown richer, driven largely by the appreciation of asset valuations. We also examine the impact of taking non‐financial saving and wealth into account, and conclude that household sector saving on the aggregate is significantly higher than the national accounts suggest. However, these adjusted measures are most relevant for the upper tail of the income and wealth distribution, raising important distributional concerns.     

American colonial incomes, 1650–1774

New data now allow conjectures on the levels of real and nominal incomes in the 13 American colonies. New England was the poorest region, and the South was the richest. Colonial per capita incomes rose only very slowly if at all, for five reasons: productivity growth was slow; population in the low‐income (but subsistence‐plus) frontier grew much faster than that in the high‐income coastal settlements; child dependency rates were high and probably even rising; the terms of trade were extremely volatile, presumably suppressing investment in export sectors; and the terms of trade rose very slowly, if at all, in the North, although faster in the South. All of this checked the growth of colony‐wide per capita income after a seventeenth‐century boom. The American colonies led Great Britain in purchasing power per capita from 1700, and possibly from 1650, until 1774, even counting slaves in the population. That is, average purchasing power in America led Britain early, when Americans were British. The common view that American per capita income did not overtake that of Britain until the start of the twentieth century appears to be off the mark by two centuries or more.     

Exploring the Impact of Energy Sources on Production,Inequality and Poverty in Simultaneous Equations Models for South Africa

Abstract: This work adapts per capita income, energy demand (sub‐group decomposed), inequality and poverty frameworks in a simultaneous equations setting to investigate the role of energy sources on per capita income, inequality and poverty in South Africa. It finds that energy sources (particularly electricity and diesel) are important in estimating production functions. Gasoline, kerosene and coal all exacerbate poverty, with the highest impacts on abject poverty. It is better to disaggregate energy sources in order to capture resource‐specific details. Redistribution efforts that focus on reduction of between‐group inequality can also moderate energy use since between‐group inequality tends to increase the demand for most energy sources. Public efforts are yielding fruits in this direction and should be encouraged. Access to energy sources like electricity, diesel and gas are crucial for productivity enhancement, but for them to yield significant anti‐poverty fruits, efforts must also target broadening capital access by the poor.     

SOUTH AFRICA AND THE NEW PARTNERSHIP FOR AFRICA'S DEVELOPMENT: ECONOMIC SPIN-OFFS AND LINKAGES

The New Partnership for Africa's Development (NEPAD) is a concerted effort by Africa's political leaders to develop a comprehensive and integrated strategic policy framework to raise current levels of socio‐economic development and reduce high levels of poverty across the African continent. The NEPAD framework recognises the need for African countries to pool their resources together in order to enhance regional development and economic integration. To this end, NEPAD emphasises capacity building and also seeks to solicit and disburse funds towards infrastructural development programmes and poverty alleviation projects, among others. South Africa's involvement with the rest of Africa has increased significantly since 1994. Trade exports, foreign direct investment (both market and resource‐seeking in nature) and public‐private partnerships have mushroomed in many parts of the continent. Many South African firms are providing the financial impetus for the infrastructural development and rehabilitation of African economies. This paper discusses salient economic linkages between South Africa and the rest of Africa within the framework of NEPAD. South Africa is the economic hub of sub‐Saharan Africa (and indeed of the African continent), with significant agricultural, manufacturing and services capacity. South African firms have invested in the development of a number of sectors in the rest of Africa, taking advantage of the new investment incentives offered by the NEPAD framework. The target sectors range from mining, the hospitality industry, engineering and construction, finance to telecommunications. These investments and economic involvements are crucial to the development of African countries and the relevant sectors that are important for the realisation of some of the objectives of NEPAD.     

Do International Remittances Affect Poverty in Africa?*

Abstract: International remittances flowing into developing countries are attracting increasing attention because of their rising volume and their impact on recipient countries. This paper uses a panel data set on poverty and international remittances for African countries to examine the impact of international remittances on poverty reduction in 33 African countries over the period 1990–2005. We find that international remittances—defined as the share of remittances in country GDP—reduce the level, depth, and severity of poverty in Africa. But the size of the poverty reduction depends on how poverty is being measured. After instrumenting for the possible endogeneity of international remittances, we find that a 10 percent increase in official international remittances as a share of GDP leads to a 2.9 percent decline in the poverty headcount or the share of people living in poverty. Also, the more sensitive poverty measures—the poverty gap (poverty depth) and squared poverty gap (poverty severity)—suggest that international remittances will have a similar impact on poverty reduction. The point estimates for the poverty gap and squared poverty gap suggest that a 10 percent increase in the share of international remittances will lead to a 2.9 percent and 2.8 percent decline, respectively, in the depth and severity of poverty in African countries. Regardless of the measure of poverty used as the dependent variable, income inequality (Gini index) has a positive and significant coefficient, indicating that greater inequality is associated with higher poverty in African countries, much in conformity with the literature. Similar results were obtained for trade openness. In the same vein, per capita income has a negative and significant effect on each measure of poverty used in the study. Our results also show that inflation rates positively and significantly affect poverty incidence, depth and severity in Africa. In all three poverty measures, the dummy variable for sub‐Saharan Africa is strongly positive, and strongly negative for North Africa. The policy implications of these results are discussed.     

An Analysis of Welfare Changes in Zimbabwe*

Abstract: This paper presents a brief account of welfare changes in Zimbabwe along the income and education dimensions between 1995 and 2003. Using sequential dominance procedures, we find that education attainment substantially improved over time. However, these gains did not necessarily translate into poverty reduction, rather welfare over the joint distribution of income and education dramatically deteriorated. These results are robust for all education partitions, income thresholds and a broad class of welfare indices. A further inquiry into the factors underlying this apparent disconnection between education and income using decomposition techniques reveals that the increase in poverty incidence cannot be attributed to household characteristics but is reflective of the broader socio‐economic trends prevailing at the time. The decline in economic growth contributed tremendously to the decline in welfare while inequality changes account for a small proportion.     

GDP in the Dutch Cape Colony: The National Accounts of a Slave‐Based Society

New estimates of the gross domestic product of the Dutch Cape Colony (1652‐1795) suggest that the Cape was one of the most prosperous regions during the eighteenth century. This stands in sharp contrast to the perceived view that the Cape was an “economic and social backwater,” a slave economy with slow growth and little progress. Following a national accounts framework, we find that Cape settlers' per capita income is similar to the most prosperous countries of the time – Holland and England. We trace the roots of this result, showing that it is partly explained by a highly skewed population structure and very low dependency ratio of slavery, and attempt to link the eighteenth‐century Cape Colony experience to twentieth‐century South African income levels.     

Estimating a poverty line: An application to free basic municipal services in South Africa

One of the key interventions aimed at improving the welfare of South African households has been local government's provision of a package of free basic municipal services to poor households. It is, however, not completely clear how different municipalities identify households that are eligible for these services. Evidence suggests that many municipalities currently provide services to all households with a monthly income of less than R1500 a month. This ‘free basic services poverty line’ is, however, low in comparison with a number of unofficial poverty lines used by policymakers and researchers in South Africa. This paper considers the impact of increasing the value of the free basic services line, in terms of the additional share and number of households eligible for support and the additional financial cost. We find that urban municipalities would face the steepest increases in their free basic services budgets with any potential increase in the free basic services poverty line.     

THE DEMAND FOR FOOD IN SOUTH AFRICA1

Food consumption is an important issue in South Africa, given its relation to poverty and deprivation. With the pressing need to increase food security, understanding the determinants of the demand for food and having some estimates of the likely impact of price and income changes has become a vital task. There is, however, surprisingly little economic research on this topic and almost none in recent times. This paper provides a comprehensive empirical analysis of the demand for food in South Africa for the years 1970‐2002. It moves beyond the usual static modelling approach in using a general dynamic log‐linear demand equation and a dynamic version of the almost ideal demand system, to provide estimates of the short‐ and long‐run price and expenditure demand elasticities.     

Born to be different: The role of local political leaders in poverty reduction in China

By incorporating imprinting theory into a political–economic framework, this paper studies the role of local political leaders in poverty reduction. Exploiting exogenous turnovers of city-level party secretaries in China, I find that city secretaries with early-life poverty experiences are more likely to increase the incomes of poor families in their jurisdictions. I further find that the effect of city secretaries' poverty experiences on the income of the poor is more pronounced in the counties that are not officially categorized as impoverished by the central government and among the families living above the poverty line set by the Chinese government but below the international poverty line proposed by the World Bank. It is suggested that local political leaders affect poverty reduction outcomes by instilling their personal preferences, which can be shaped by their early experiences, into their economic decisions.     

Inward and outward foreign direct investment and poverty: East Asia vs. Latin America

Using panel data of 12 middle-income countries in East Asia as well as Latin America, this paper examines how openness in general and outward FDI in particular affects poverty. While economic growth and trade openness are found to be associated with lower poverty, both outward and inward FDI adversely affect the mean income of the poorest quintile of the population. The results hold in both regions, though the Latin American countries seem to be in a somewhat less favorable situation.     

中国经济增长的减贫效果评估

本文采用Kakwani等人提出的测度方法--减贫经济增长率,定量分析了我国20世纪80年代以来经济增长对于城乡贫困的影响.结论显示,经济增长对高阶贫困指数的影响大于低阶贫困指数,表明反贫困成本(转移支付金额)相对于贫困人口而言,对经济增长更加敏感.同时,减贫经济增长率的波动幅度要明显高于实际收入增长率,这意味着贫困人口更易受宏观经济波动的冲击.因此,保持宏观经济的稳定以及改善收入分配、加强社会保障等有利于社会公正.