AN ALTERNATIVE PERSPECTIVE ON SOUTH AFRICA'S PUBLIC DEBT, 1962‐1994

The history of public debt reflects the cumulative effect of fiscal decisions and real outcomes in the economy. In the South African case the published record on public debt distorts the historical perspective on the associated fiscal decisions. This paper shows the impact of adjusting the South African public debt on an accrual basis to take account of two major obligations assumed in the first half of the 1990s, namely actuarial pension fund deficits and government debt of the apartheid homelands. The adjusted series is less volatile and rose less steeply between 1989 and 1996 than the official, cash‐based debt series. Failing to account for the evolution of these obligations exaggerates the impression of weak fiscal discipline in the early 1990s and exemplary fiscal prudence in preceding decades.     

ELECTRICITY REFORMS IN MALI: A MACRO–MICRO ANALYSIS OF THE EFFECTS ON POVERTY AND DISTRIBUTION

This paper uses a computable general equilibrium (CGE) micro-simulation model to explore the distributional and poverty-related effects of price reform in the electricity sector of Mali, a poor country in West Africa. In the first part of the paper we analyse the distribution of electricity in Mali by income deciles, showing that few poor households are connected to the electricity grid. We then apply a sequential CGE micro-simulation model to track the transmission mechanisms between increases in electricity prices and changes in poverty and inequality among different household groups. Our results show that direct price increases have a minimal effect on poverty and inequality, whereas the general equilibrium effects of such increases are quite strong and negative. The compensating policies we tested do not help those who lose from the pricing reform. In fact they amplify the negative effects.     

SOUTH AFRICA'S POST‐LIBERALISED CAPITAL FLOWS AND BUSINESS CYCLE FLUCTUATIONS

This study used Christiano and Fitzgerald filtered correlation analysis to investigate the cyclical relationships between South Africa's post‐liberalised capital flows and domestic business cycle fluctuations. The results show that foreign direct investment inflows are counter‐cyclical and proactive, while the “hot” inflows are acyclical. Thus, South Africa's post‐liberalisation “hot” inflows have not been significantly associated with domestic business cycle fluctuations. In contrast, the capital outflows are found to be consistently procyclical and proactive, suggesting that the outflows are more significantly associated with domestic business cycle fluctuations than the capital inflows. In addition, it is found that the cyclical relationships between the capital inflows and the business cycle components of exports, household consumption and gross fixed investment are generally procyclical, except for portfolio inflows, which have a counter‐cyclical relationship with fixed investment. In contrast, the capital outflows are counter‐cyclically associated with exports and household consumption, and procyclically associated with fixed investment.     

Estimating the Short Run Effects of South Africa's Employment Tax Incentive on Youth Employment Probabilities using A Difference‐in‐Differences Approach

South Africa's Employment Tax Incentive (ETI) came into effect on the 1st of January 2014, with the objective of reducing the substantial national youth unemployment rate. Under the ETI, firms are eligible to claim a deduction from their taxes due, for the portion of their wage bill that is paid to certain groups of youth employees. We utilise several waves of nationally representative data and implement a difference‐in‐differences methodology at the individual level, in order to identify the effects of the ETI on youth employment probabilities in the short run. Our primary finding is that the ETI did not have any statistically significant and positive effects on youth employment probabilities. The point estimate from our preferred regression is ?0.005 and the 95% confidence interval is from ?0.017 to 0.006. We also find no evidence that the ETI has resulted in an increase in the level of churning in the labour market for youth. Thus, any decrease in tax revenues that arise from the ETI are effectively accruing to firms which, collectively, would have employed as many youth even in the absence of the ETI.     

Robust Estimates of Changes in Poverty and Inequality in Post‐Independence Namibia

We estimate changes in the distribution of household consumption expenditure in Namibia since independence in 1990 and the effects on poverty. To produce comparability between two household surveys, we use survey‐matching techniques, and we apply the framework of stochastic dominance to test the robustness of our results. The results reveal a significant decrease in the poverty headcount over the period and small but insignificant decreases in the country's extremely high levels of inequality. Decomposition analysis shows that poverty reduction in Namibia is largely driven by growth in mean incomes rather than redistribution. Even so, there have been important changes in inequality among different social groups especially as educational attainment has replaced ethnicity as the main determinant of between‐group inequality.     

HIV/AIDS AND POVERTY IN SOUTH AFRICA: A BAYESIAN ESTIMATION OF SELECTION MODELS WITH CORRELATED FIXED‐EFFECTS

In this paper, we estimate the causal impact of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) on monetary poverty using a panel database from South Africa. We treat endogeneity and selection problems associated with HIV/AIDS by a selection model that includes correlated fixed effects both in the level and in the participation equations, which are estimated simultaneously via original Bayesian methods. We model the consequences of the illness on both labour income and income transfers, and disentangle between urban and rural households. While no significant impact of HIV/AIDS on labour income is found because of households' recomposition, we find a substantial fall in received transfers among rural population and a dramatic increase in chronic poverty.     

EXCHANGE RATE PASS‐THROUGH TO IMPORT PRICES IN SOUTH AFRICA: IS THERE ASYMMETRY?1

This paper examines the magnitude and speed of exchange rate pass‐through (ERPT) to import prices in South Africa. It further explores whether the direction and size of changes in the exchange rate have different pass‐through effects on import prices, i.e. whether the exchange rate pass‐through is symmetric or asymmetric. The findings of the study suggest that ERPT in South Africa is incomplete but relatively high. Furthermore, ERPT is found to be higher in periods of rand depreciation than appreciation, which supports the binding quantity constraint theory. There is also evidence to suggest that pass‐through is slightly higher in periods of small changes than large changes in the exchange rate in harmony with the menu cost theory when the invoices are denominated in the exporters' currency.     

MEASURING THE IMPACT OF EDUCATIONAL INTERVENTIONS ON THE ACADEMIC PERFORMANCE OF ACADEMIC DEVELOPMENT STUDENTS IN SECOND‐YEAR MICROECONOMICS

This paper analyses the impact of educational interventions made in the first‐ and second‐year microeconomics courses on academic development students' final mark in the second‐year course. It also addresses issues of methodology, specification, and statistical analysis with respect to other studies in the field. The results suggest that the educational interventions in the first‐year had a positive impact on the academic performance of the academic development cohort, relative to the mainstream cohort for the first period (2000‐2002). The results also suggest that the educational interventions introduced in the second period (2003‐2005), in the form of voluntary workshops, improved the academic performance of the academic development and mainstream cohorts.     

PRICE ELASTICITIES AND PRICING POWER IN EMERGING MARKETS: THE CASE OF PETROCHEMICAL‐DERIVED PLASTICS IN SOUTH AFRICA1

This paper examines whether there necessarily exists a conflict between allocative and productive efficiency in small open economy markets. That productive efficiency favours market concentration is not in dispute, and the sole question we face is whether allocative efficiency suffers under high market concentration. We proceed theoretically and econometrically. We find that the conflict between productive and allocative efficiency is not necessarily as stringent as the international competition policy literature suggests should be the case. In particular, we note that the strategic interaction between the large domestic producer and its competitors makes feasible a range of alternative price elasticities of demand, and empirically that all price elasticities of demand are less than or equal to unity. Nevertheless, the impact of market structure is such as to render feasible a wide range of possible levels of pricing power.