Wealth data quality in the National Income Dynamics Study Wave 2

This paper examines the quality of data on household assets, liabilities and net worth in the South African National Income Dynamics Study (NIDS) Wave 2. The NIDS is the first nationally representative survey on household wealth in South Africa. The cross-sectionally weighted data are found to be fit for use in terms of the univariate distributions of net worth, assets and liabilities, but population totals are probably underestimated due to the presence of missing wealth data in Phase 2 of Wave 2 that is not taken into account in the weights. When compared with national accounts estimates of household net worth, there is an apparent inversion of the estimated totals of financial assets versus non-financial assets. Further research is required into why this is so. We find that the NIDS wealth module is a suitable instrument for the analysis of household wealth.     

Wages and Wage Inequality in South Africa 1994–2011: Part 1 – Wage Measurement and Trends

We analyse the long‐term trends in wage inequality in South Africa, using household survey data. We show that the trends in household income inequality are largely driven by changes in wage inequality. Given the detailed nature of our series we show that measurement issues and breaks in the series need to be dealt with in order to draw robust conclusions from the data. Most standard inequality measures show that wage inequality has increased over the period. Nevertheless the choice of measure matters, because there are different trends in different parts of the distribution. It appears that the distribution below the median has become more compressed, while the top of the wage distribution has moved away from the median. The inequality in the labour market translates into even higher inequality in society given that high earners tend to live together with other high earners while low wage individuals often end up sharing their incomes with the unemployed. Furthermore there are many South Africans with access to no wage income. Given the trends analysed here it is not surprising that overall inequality in South Africa has not come down or has even increased since the end of apartheid.     

Wages and Wage Inequality in South Africa 1994–2011: Part 2 – Inequality Measurement and Trends

We analyse the long‐term trends in wage inequality in South Africa, using household survey data. We show that the trends in household income inequality are largely driven by changes in wage inequality. Given the detailed nature of our series we show that measurement issues and breaks in the series need to be dealt with in order to draw robust conclusions from the data. Most standard inequality measures show that wage inequality has increased over the period. Nevertheless the choice of measure matters, because there are different trends in different parts of the distribution. It appears that the distribution below the median has become more compressed, while the top of the wage distribution has moved away from the median. The inequality in the labour market translates into even higher inequality in society given that high earners tend to live together with other high earners while low wage individuals often end up sharing their incomes with the unemployed. Furthermore there are many South Africans with access to no wage income. Given the trends analysed here it is not surprising that overall inequality in South Africa has not come down or has even increased since the end of apartheid.     

IS THERE EVIDENCE OF A WAGE PENALTY TO FEMALE PART‐TIME EMPLOYMENT IN SOUTH AFRICA?

In this paper, we investigate female part‐time employment in South Africa. Using household survey data for South Africa from 1995 to 2004, we show that women are over‐represented in part‐time employment, and that the growth in part‐time work has been an important feature of the feminisation of the labour force. In contrast to many studies of part‐time work in other countries, however, we find evidence of a significant wage premium to female part‐time employment. The premium is also robust to fixed effects estimations using Labour Force Survey panel data from 2001 to 2004, where controlling for unobservable differences increases its size. The premium persists with different hourly thresholds defining part‐time employment and when we account for possible reporting errors in hours worked.     

Analysing post-apartheid poverty trends by geo-type, 1997–2012: The understated role of urbanisation and social grants

This article investigates poverty trends in post-apartheid South Africa with an explicit focus on differences between rural and urban areas. Using nationally representative household survey data from 1997–2012, I first describe changes in population characteristics and household access to different income sources and services, by urban–rural geo-type. Income data are then used to generate poverty statistics, which cast light on divergent trends in rural and urban areas. Next, I employ a poverty decomposition method to further explore some potential reasons why the poverty trends in rural and urban areas have differed. Data from the Afrobarometer are then used to probe how subjective non-monetary welfare has changed over time across geo-types. The evidence from all surveys suggests that the dramatic increase in access to services and social grants in rural areas has played a vital role in poverty reduction.     

Household satisfaction: Past,present and future perspectives

In the past two decades South African quality of life has been measured at the individual level in nationwide surveys and studies of special groups using happiness and satisfaction measures. In 1993 the Southern Africa Labour and Development Research Unit (Saldru) pioneered a satisfaction measure to capture subjective well‐being at the household level for the Project for Statistics on Living Standards and Development (PSLSD). The article assesses the usefulness of the new indicator by comparing present household satisfaction with individual‐level satisfaction trends and with PSLSD measures of past and projected future satisfaction and household income and expenditure. It is concluded that the household satisfaction measure is a useful social indicator in that it yields consistent and readily interpretable results and is sensitive to income and expenditure differentials. In confirmation of findings from a recent cross‐national study, the higher income households in the Saldru study reported higher levels of perceived well‐being.     

Integration into the South African core economy: household‐level covariates

In this analysis of household survey data, households' main income sources are used as indicators of integration into the South African core economy. The allocation of main income sources is studied as the outcome of households' demographic composition, geographic location and earners' characteristics. The emerging picture of household income generation is one that disputes the common perception of African households as raising their incomes from a multitude of sources. The majority of surveyed households rely to a large extent on a single source of income and a single income earner. Separate multinomial logit models are estimated for urban and non‐urban households where, in addition to the considerable association with non‐urban residence, prominent earner covariates of low‐integration income sources are female gender, old or young working age, and low levels of education. Both provincial location and within‐provincial, subregional locations display strong impacts. The study also finds associations between main income sources and households' demographic compositions that are compatible with findings both in studies on private transfer behaviour and in the growing literature on endogenous household formation in South Africa.     

Job Creation and Destruction in South Africa

Analysts of the South African labour market have mainly used household surveys to analyse the labour market. It has been more difficult to explore the labour demand of firms, as a result of limited data availability. We use the Quarterly Employment Statistics survey, an enterprise survey conducted by Statistics South Africa, to explore how South African firms create and destroy jobs, thereby shedding light on many of the policy questions that are relevant in a high unemployment society like South Africa. We find that job creation and destruction rates are similar to those found in Organisation for Economic Co‐operation and Development countries. There is little evidence that labour legislation creates rigidities that prevent firms from hiring or firing workers. We also find that larger firms are better net creators of jobs than small firms and that net job creation rates are negative in manufacturing. Our research has important policy implications – particularly for the South African National Planning Commission's 2030 plan, in which new jobs are envisaged to come mainly from small‐ and medium‐sized firms. Our research suggests that this scenario is not likely without changes to policy or legislation.     

Modelling Intercontinental Tourism Consumption in South Africa: A Systems‐of‐Equations Approach

This paper investigates the pattern of inbound tourists' consumption in South Africa, examining four main intercontinental markets and five different tourism goods. The empirical investigation develops an almost ideal demand system (AIDS) model and it extends recent research by allowing tourists to base their spending decision on the real effective price differences between South Africa and their home country. The results show that tourist spending in South Africa is a luxury good, and tourists react normally to a change in the relative price of goods. The cross‐price elasticities suggest that the preferences of different markets influence their view of substitutability and complementary effects between various products in South Africa.     

THE PREDICTABILITY OF STOCK MARKET RETURNS IN SOUTH AFRICA: PARAMETRIC VS. NON‐PARAMETRIC METHODS

This paper compares the forecasting performance of a sub‐class of univariate parametric and non‐parametric models in predicting stock market returns in South Africa. To account for conditional heteroskedasticity in stock returns data, the non‐parametric model is generated by the conditional heteroskedastic non‐linear autoregressive (NAR) model, while the parametric model is produced by the generalised autoregressive conditional heteroskedastic in mean (GARCH‐M) model. The results of the paper show that the NAR as a non‐parametric model performs better than the GARCH‐M model in short‐term forecasting horizon, and this indicates the importance of a distribution‐free model in predicting stock returns in South Africa.     

RESEARCH NOTE: ERRORS IN THE OCTOBER HOUSEHOLD SURVEY 1994 AVAILABLE FROM THE SOUTH AFRICAN DATA ARCHIVE1

The on‐line electronic documentation supplied with the 1994 October Household Survey by the South African Data Archive (SADA) appears to be incorrect. In particular, the electronic version of the questionnaire does not correspond to the hard copy in the possession of the author. The most serious error is that the race classification in the electronic copy is different from the classification on the hard copy. Researchers relying on the electronic copy will erroneously interchange the categories “Coloured”, “White” and “Black”. This could lead to seriously misleading analyses. The reason for this mistake can probably be attributed to a retyping of the questionnaire using the 1993 OHS as a template.     

Monetary policy and inflation in South Africa: A VECM augmented with foreign variables

We develop a structural cointegrated vector autoregressive (VAR) model with weakly exogenous foreign variables, known as an augmented VECM or VECX*, suitable for a small open economy like South Africa. This model is novel for South Africa in two ways: it is the first VECX* developed to analyse monetary policy and the first model that uses time‐varying trade weights to create the foreign series. We impose three significant long‐run relations (augmented purchasing power parity, uncovered interest parity and Fisher parity) to investigate the effect of a monetary policy shock on inflation. The results suggest the effective transmission of monetary policy.     

CAPITAL MOBILITY IN SUB-SAHARAN AFRICA: A PANEL DATA APPROACH

In this paper we are primarily concerned with assessing the degree of capital mobility in sub‐Saharan Africa. Using the methodology as proposed by Feldstein and Horioka (1980)—later termed the “Feldstein‐Horioka puzzle”—we test the hypothesis of perfect capital mobility against the alternative of imperfect capital mobility. Following Vamvakidis and Wacziarg (1998) and Isaksson (2000), provision is made in our model to show the dependency of the lesserdeveloped countries on international finance and aid and how a more open economy contributes towards improving the level of capital movement in these countries. We also assess the change in the degree of capital mobility over the time period in an effort to see whether institutional and political changes have been successful. We show that, compared to the region, South Africa is, to a large extent, more developed and should therefore play a leading role in the “African Renaissance”. Stationary panel data estimation techniques are applied to a sample of 36 sub‐Saharan African countries over the time period 1980–2000. The benefits of using one‐way error component models are derived from simultaneously employing time and cross‐section dimensions of the data, resulting in a substantial increase in the degrees of freedom. The fixed and random effects models enable us to acknowledge country heterogeneity within the panel, making provision for differences across countries like capital control policies, financial and capital market structures and exchange rate regimes.     

INFLATION IN SOUTH AFRICA: A TIME‐SERIES VIEW ACROSS SECTORS USING LONG‐RANGE DEPENDENCE

In this paper I examine the time‐series evolution of the log consumer price index series in South Africa, disaggregating the data by sectors. I examine the time period 1990m1‐2008m12, i.e. focusing on the post‐apartheid period. I used methodologies based on fractional integration using parametric and semiparametric techniques. The results indicate that the (total) inflation rate in South Africa is long memory, with an order of integration in the range (0, 0.5). The same happens with most of the data disaggregated by sectors with values of d above 1 in the log prices. Evidence of I(0) inflation is obtained in some cases for “fruits and nuts”, “vegetables” and “sugar”, and evidence of mean reversion in the log prices is only obtained in the case of “fish and other seafood”.     

The determinants of rural and urban household poverty in the North West province of South Africa

Based on standard poverty measures, the extent of poverty in the North West province is on average worse than in South Africa. For instance, the poverty gap ratio for North West is twice that of the South African average, and the FGT index is three times as high. This article therefore aims to identify the determinants of rural and urban poverty in the North West province of South Africa. Using data gathered from a survey of 593 black households across the province, probit model estimates suggest that the major significant determinants of household poverty in both rural and urban areas are education and household size. A difference between rural and urban poverty is, first, that extra female adults in a rural household raise the probability of poverty. Secondly, having a migrant (out) worker as head of the household in rural areas lowers the probability of poverty, while this does not apply to urban households. A sensitivity analysis for the robustness of the results over a range of poverty lines reveals that the impact of education is much stronger for poorer households than for more wealthy households.     

Are Determinants of Portfolio Flows Always the Same? ‐ South African Results from a Time Varying Parameter Var Model

The literature on determinants of cross‐border capital flows has consistently assumed the determinants of such flows to be constant throughout the sample. This paper investigates this notion by estimating the time varying relationship between portfolio flows to South Africa and two widely accepted determinants of such flows: the sovereign spread and global risk (measured by the CBOE Volatility Index, henceforth VIX). The results show that the time variation is highly significant and a constant parameter model will give biased estimates of the effects of risk on capital flows. The paper also gives important insights to South African policy makers and financial practitioners: Bond flows (non‐resident purchases of South African bonds) have become more sensitive to the VIX after 2010. Share flows were particularly sensitive at the peak of the 2008 global financial crisis, but have at other times not responded in a statistically significant manner to changes in global risk. The relationships are estimated using a time varying parameter vector autoregressive (TVP VAR) model with stochastic volatility.     

DETERMINANTS OF SOUTH AFRICA‐US INTRA‐INDUSTRY TRADE IN SERVICES: A WILD BOOTSTRAP DYNAMIC PANEL DATA ANALYSIS1

The study attempts to empirically identify factors that determine South Africa–US intra‐industry trade (IIT) in selected services during the period 1994‐2002. The study utilises Liu‐Davidson‐Flachaire wild bootstrap, which is robust to heteroscedasticity and provides estimates of the degree of parameter bias. The empirical results, in principle, show that South Africa–US IIT in the selected services is determined by factors similar to goods‐based “North‐South” IIT studies. Specifically, differences in per capita income and differences in market size negatively affect IIT. The study also indicates that US foreign direct investment in South Africa positively contributes to the unaffiliated IIT in services.     

Exclusive Growth? Rapidly Increasing Top Incomes Amid Low National Growth in South Africa

Despite South Africa’s need for inclusive economic growth, we find that the top income percentiles continue to diverge from the rest of the income distribution. We compare household survey data and tax data (which, unlike household survey data, includes accurate data for the very rich) to investigate the patterns of income growth over the period 2003 to 2018. We find that the gap between the stagnant middle and the top end of the income distribution widened, particularly over the post-recession period. We also show that the divergence was partly driven by high returns to capital for those with top incomes.     

Effects of farmer support programmes on consumption and investment

Effects of farmer support programmes (FSPs) of the Development Bank of Southern Africa on consumption and investment are determined by utilising cross‐sectional survey data from the Mashamba and Khakhu areas of the Venda homeland in South Africa. Income elasticities indicate that the demand for goods (staple food) produced by households increases less than the demand for purchased goods. A discriminant analysis of surplus versus deficit producers indicates that surplus production is associated with farmers who participate in the FSP (ie farmers using chemical fertilizers and purchasing inputs on credit). The existence of soil erosion, availability of ploughing services, expenditure on transport education, medical and personal items, and the existence of a savings account also play important roles in explaining the difference in production performance between surplus and deficit food‐producing households.     

INVESTIGATING THE GENDER GAP IN SOUTH AFRICAN TRADE UNION MEMBERSHIP: A DECOMPOSITION ANALYSIS

This paper investigates the gender difference in trade union membership among African men and women in South Africa. Using labour force survey data for 2001 and 2007, we show that at least two thirds of the gender gap is explained by differences in union‐related characteristics. When compared with gender differences in personal, household‐ and job‐related characteristics, disparities in job characteristics account for a larger proportion of the gender gap. These findings imply that women would have had higher unionisation rates than men if they possessed male endowments of union‐related characteristics, especially access to unionised jobs.