Understanding the Democratic Transition in South Africa

47 Pages Posted: 4 Feb 2012 Last revised: 19 Feb 2021

See all articles by Robert P. Inman

Robert P. Inman

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Daniel L. Rubinfeld

University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

Date Written: February 2012

Abstract

South Africa's transition from apartheid to democracy stands as one of the past century's most important political events. The transition has been successful to this point because the new constitution adopted a form of federal governance that has been able to provide protection for the economic elite from maximal redistributive taxation. Appropriately structured, federal governance creates a "hostage game" in which the majority central government controls the tax rate but elite run province(s) control the provision of important redistributive services to a significant fraction of lower income households. At least to today, the political economy of South Africa has found a stable equilibrium with less than maximal redistributive taxation. Moreover, the move to a democratic federalist system has improved the economic welfare of both the white minority and the black majority. Whether the federal structure can continue to check maximal taxation depends crucially upon the rate of time preference of the majority and their demands for redistributive public services. A new, impatient and more radical majority (ANC) party threatens the current equilibrium.

Suggested Citation

Inman, Robert P. and Rubinfeld, Daniel L., Understanding the Democratic Transition in South Africa (February 2012). NBER Working Paper No. w17799, Available at SSRN: https://ssrn.com/abstract=1999264

Robert P. Inman (Contact Author)

University of Pennsylvania - Finance Department ( email )

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Daniel L. Rubinfeld

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