South Africa: Labor Market Dynamics and Inequality

38 Pages Posted: 9 Dec 2016

See all articles by Rahul Anand

Rahul Anand

International Monetary Fund (IMF)

Siddharth Kothari

International Monetary Fund (IMF)

Naresh Kumar

UC Santa Cruz

Date Written: July 2016

Abstract

This paper analyzes the determinants of high unemployment in South Africa by studying labor market dynamics using individual level panel data from the Quarterly Labor Force Survey. While prior work experience and gender are found to be important determinants of the job-finding rate, education attainment and race are important determinants of the job-exit rate. Using stock-flow equations, counterfactual exercises are conducted to quantify the role of these different transition rates on unemployment. The paper also explores the contribution of unemployment towards inequality. Reducing unemployment is found to be important for reducing inequality - estimates suggest that a 10 percentage point reduction in unemployment lowers the Gini coefficient by 3 percent. Achieving a similar reduction solely through transfers would require a 40 percent increase in government transfers.

Keywords: Unemployment, South Africa, Income inequality, Labor markets, Panel analysis, Regression analysis, Unemployment, South Africa, Labor market transitions, Inequality

JEL Classification: J63, J21, D31

Suggested Citation

Anand, Rahul and Kothari, Siddharth and Kumar, Naresh, South Africa: Labor Market Dynamics and Inequality (July 2016). IMF Working Paper No. 16/137. Available at SSRN: https://ssrn.com/abstract=2882572

Rahul Anand (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Siddharth Kothari

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Naresh Kumar

UC Santa Cruz ( email )

Santa Cruz, CA 95064
United States

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