Understanding South Africa's Economic Puzzles

KSG Working Paper No. RWP06-039

Center for International Development Working Paper No. 130

58 Pages Posted: 5 Nov 2006

See all articles by Dani Rodrik

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

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Abstract

South Africa has undergone a remarkable transformation since its democratic transition in 1994, but economic growth and employment generation have been disappointing. Most worryingly, unemployment is currently among the highest in the world. While the proximate cause of high unemployment is that prevailing wages levels are too high, the deeper cause lies elsewhere, and is intimately connected to the inability of the South African to generate much growth momentum in the past decade. High unemployment and low growth are both ultimately the result of the shrinkage of the non-mineral tradable sector since the early 1990s. The weakness in particular of export-oriented manufacturing has deprived South Africa from growth opportunities as well as from job creation at the relatively low end of the skill distribution. Econometric analysis identifies the decline in the relative profitability of manufacturing in the 1990s as the most important contributor to the lack of vitality in that sector.

Keywords: Economics - International Economics, International Development

Suggested Citation

Rodrik, Dani, Understanding South Africa's Economic Puzzles. KSG Working Paper No. RWP06-039; Center for International Development Working Paper No. 130. Available at SSRN: https://ssrn.com/abstract=939651

Dani Rodrik (Contact Author)

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Centre for Economic Policy Research (CEPR)

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