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Allocative efficiency between and within the formal and informal manufacturing sector in Zimbabwe
No full textResource misallocation has the potential to reduce aggregate total factor productivity and undermine industrial development. These effects can be particularly pronounced in emerging economies where large market frictions impede efficient resource allocation. This paper investigates the extent and nature of resource misallocation between and within the formal and informal manufacturing sector in Zimbabwe. Applying the approach developed by Hsieh & Klenow (2009) to firm-level microdata, the results reveal extensive resource misallocation in both the formal and informal manufacturing sector. Misallocation is more pronounced in informal sector firms and is associated with relatively large capital market distortions. Further, misallocation is more pronounced amongst relatively productive firms, thus exacerbating aggregate losses in total factor productivity (TFP). Estimates indicate that aggregated gains in TFP of 126.7% can be realized through efficient resource allocation.An updated version of this working paper is forthcoming in the World Bank Economic Review.
This is a joint SALDRU and PRISM working paper.Financial support for this project was provided by the United Kingdom Department for International Development (now Foreign, Commonwealth & Development Office (FCDO)) funded Growth and Labour Markets in Low Income Countries Programme (“GLM | LIC”) (GA-C3-RA6-345) managed by the Institute of Labor Economics (IZA) and administered by the Southern Africa Labour and Development Research Unit at the University of Cape Town
From Drought to Distress: Examining the Mental Health Consequences of Water Scarcity in Ethiopia
No full textIn 2021, Ethiopia experienced a prolonged drought after two consecutive failed rainy seasons. This paper investigates the effect of the drought on young adults’ experiences of anxiety and depression by applying a difference-in-differences strategy to this event, in a natural experiment. I construct a Standardised Precipitation Index using 40 years of satellite rainfall data to exogenously measure local drought intensity and combine with unique longitudinal data. I find that exposure to the drought increases the probability of young adults experiencing symptoms consistent with either mild or severe anxiety (depression) by nearly 12 (10) percentage points. This represents a 63% and 55% increase relative to the pre-drought sample averages, respectively. These results are robust across alternative model specifications and a variety of sensitivity checks. The impact on depression is driven by those who were severely exposed to the drought, while both mild and severe exposure affect anxiety. The drought has a greater impact on individuals in rural households, those working in agriculture, and on individuals born into the poorest households. According to the mediation model estimated, the increase in mental health issues may partly be explained by the drought’s impact on inflation, perceived household poverty, and physical illness
The South African personal income tax base, 2011-2018: Income and taxable income, adjusted for retirement fund and medical expense reporting changes
No full textTax administration statistics now provide considerably more complete and reliable measures of South African personal income and its distribution than the available household or other survey sources. However, there are difficulties in using tax data across time, as both policy and reporting changes influence the administrative statistics of income. This paper uses two sets of adjustments to generate a consistent personal income series for the 2011–2018 period: upward adjustments to published statistics on assessed taxpayers to provide estimates consistent with the overall tax base, and adjustments for retirement contribution and medical expense reporting changes in 2013, 2015, and 2017 that affect the calculation of taxable income and income before deductions. About half of all individuals reporting income to the South African Revenue Service are contributors to retirement funds, and just over a quarter qualify for medical scheme or medical expense tax benefits. The resulting adjusted income distribution estimates show that the tax base increased robustly relative to GDP over this period, that income shifted towards older and higher real income taxpayers, and that income inequality increased.The assistance of Mlungisi Ndlovu and Bill Seota (UNU-WIDER) and Aidan Horn (SALDRU) in compiling the source data tabulations on which this paper is based is gratefully acknowledged. This study has been prepared within the UNU-WIDER project Southern Africa—Towards Inclusive Economic Development (SA-TIED). https://doi.org/10.35188/UNU-WIDER/2023/351-2
The views expressed in this paper are those of the author(s), and do not necessarily reflect the views of the Institute or the United Nations University, nor the programme/project donors
Leaving the parental home in post-apartheid South Africa
No full textThe process by which young people leave home in South Africa is central for understanding the lives of the country’s young adult population, as well as, their role in the structural household change that has occurred over the post-apartheid period. However, hardly any quantitative work has been conducted on this process and no work exists on trends. I provide nationally-representative trends of home-leaving for young adults in South Africa for the first time using a stacked series of annual cross-sections between 1995 and 2011. I answer questions like ‘who leaves home and when?’ ‘how has this changed over time?’ and ‘what are the main reasons for leaving or staying?’. I find that different home-leaving rates by race converged in the late 90s and became roughly steady in the decade of the 2000s. Most South Africans only left home by age 25 - but whether this can be interpreted as ‘delayed’ or not is complicated by adherence to diverse family patterns and the continued relevance of stretched households. Home-leavers are especially dependent on labour market income in the absence of social grants targeted, in particular, at the large unemployed young adult population. Since young women face higher unemployment rates than young men, women were notably more reliant than men on marriage as a pathway out of the parental home. Over time, young male home-leavers are living alone at higher rates, meaning they have contributed to general household proliferation even if the rate at which they have left home has been mostly flat
Developing a Youth Labour Market Index for South Africa at the sub-national level
No full textAssessing the labour market situation for young people is a critical area of research that has attracted the attention of scholars and policymakers globally. However, understanding the complexity of the labour market for youth, particularly in developing countries, requires a comprehensive, multidimensional approach. We address this need by developing a Youth Labour Market Index (YLMI) for South Africa, incorporating ten indicators that capture the unique youth labour market situation from various perspectives. Drawing on nationally representative data from the Quarterly Labour Force Survey for the period 2013-2023, the YLMI provides a nuanced understanding of the labour market for 15-35-year-olds, and further allows for the identification of variations in the labour market’s functionality for various subgroups of the youth population. The study reveals alarmingly low YLMI scores for South Africa and its nine provinces, which have decreased over time. Significant gender and rural-urban disparities in the distribution of the YLMI scores are observed, and the YLMI scores exhibit an unequal spatial distribution, with lower values concentrated in provinces in former homeland areas. Further analysis reveals that the working conditions and education dimensions are the primary contributors to the low YLMI score, highlighting their role as major drivers of the underperforming youth labour market. Specifically, relative unemployment, skills mismatch, vulnerable employment, and lack of secondary education are the key indicators contributing to the low YLMI scores, with vulnerable employment being particularly critical. These results highlight that the South African labour market for youth is highly dysfunctional and has worsened over time. A defunct labour market entrenches inequality by contributing to further unemployment, pointing to an urgent need for policymakers to address the deteriorating situation. The YLMI provides a valuable tool for informing and targeting the necessary policies and interventions to promote a well-functioning labour market for youth.This paper was supported through the EU-AFD Research Facility on Inequalitie
The impact of migration on the welfare of migrant sending households in selected rural areas of Zimbabwe
No full textIncomes are volatile in poor communities and sometimes households live on less than a dollar per day. To cushion themselves from volatile income, poor families resort to borrowing from friends and job hunting. Establishing a business enterprise is also among alternatives adopted by family members in trying to reduce financial vulnerability. However, the business enterprise option is impeded by lack of capital, thus household units end up considering migration as an indirect strategy to escape poverty. The New Economics of Labour Migration theory, recognizes family participation in migration decisions as a strategy for moving out of poverty, thus signaling potential welfare linkages between migrants and family members left behind. The current study investigates the impact of migration on welfare of migrant sending households in rural Zimbabwe using cross-sectional data. The study employs a Counterfactual approach and utilizes a two stage Heckman selection model to control for selection bias. Preliminary results indicate that on average, migration impacts household welfare positively but the welfare gains are not evenly distributed among households
Profile of young people not in employment, education or training (NEET) aged 15-24 years in South Africa: an annual update
No full textThis paper presents the latest profile of young people aged 15 to 24 not in education, employment, or training (NEET) in South Africa, utilising data from the Quarterly Labour Force Survey (QLFS), Quarter 1, and the General Household Survey (GHS). The findings reveal that South Africa has consistently had a NEET youth rate above 30% for the past decade, with over 3 million young people affected. This signifies a failure to achieve SDG 8, Target 8.6, of substantially reducing the proportion of NEET youth by 2020 and poses a risk to the country's progress towards the 2030 Agenda for Sustainable Development. Contrary to popular belief, our findings dispel the misconceptions that NEET youth are disinterested or unwilling to work, as more than 2 million of these youth expressed wanting to work. The analysis shows that a significant portion of the unemployed NEETs are new entrants to the labour market who have been searching for employment for extended periods, exceeding one year or even five years. Additional analysis shows that a staggering 2.4 million (68.5%) of young NEETs continue to reside in income-poor households. The analysis further identifies being female, married, residing in urban areas, living in income-poor households and households with children under seven years as key factors associated with being NEET among youths. Being married and living in income-poor households are the most influential factors in the likelihood of being NEET among young people. These findings carry important policy implications for reducing the NEET rate in South Africa and for fostering increased educational and labour market engagement among young people.This paper was supported through the EU-AFD Research Facility on Inequalities
Learning in lockdown: University students’ academic performance during COVID-19 closures
No full textUsing longitudinal, institutional data, we estimate the effects of pandemic-related closures on the academic performance trajectories of undergraduate students at a university in South Africa. Leveraging data from both the 2020 and 2021 academic years, and using difference-in-difference models, we find that performance gains made in 2020 are reversed in 2021, with performance dropping relative to pre-pandemic trends. Moreover, we find a widening achievement gap between students from differing socioeconomic backgrounds, suggesting household inequalities played out in student performance differentials to a greater extent in 2021 – despite the reopening of campus residences that year. This result persists even when accounting for the fact that drop out rates in 2021 are substantially lower compared to previous years. Together, results suggest that the improvements observed in 2020 did not reflect true learning gains, and support hypotheses that a reduction in content taught, increased marker leniency, and a reduction in credit loads were likely drivers of improved performance in the 2020 academic year.This work was funded by the Spencer Foundation. Ethics approval was obtained from the Commerce Faculty Ethics Committee, University of Cape Town
Household formation, living alone, and not getting married in South Africa
No full textIn South Africa, households were formed at about twice the rate that the population grew between 1995-2011, and the count of single-person households mushroomed by 150%. Women became more likely to head households and men more likely to live alone over this period. Economic conditions in post-apartheid South Africa have been challenging; unemployment and poverty are high and income inequality is extreme. The question of why South Africans would form more and smaller households under these conditions is a provoking one. This paper seeks to understand the influence of long-term decline in marital rates in South Africa on the household formation process. Reweighted household survey data covering 1995-2011 is used to set up a model of household headship and living alone that includes an interaction of marital and labour market status. This is decomposed over time using an Oaxaca-Blinder decomposition. An acceleration in the rate at which never-married people form households emerges as an important driver of household proliferation (versus there simply being more never-married people). This paper fills a gap in the South African econometric literature on household formation pertaining to our understanding of the role of marital status. Most econometric research on household formation for South Africa focuses on employment and omits marital status even as a control
Protests in Latin America in the middle of ongoing global systemic crises
No full textThe last years have observed a series of mounting challenges that have deepened tensions in the region, as illustrated by the increase in the number of protests in the region. The increase in tensions relate to the intersection of worsening of living conditions for millions of citizens- a consequence of the pandemic, the ripple effects of Russian aggression towards Ukraine, and the concerns about a coming global recession. These tensions will bring challenges to political systems across the region, manifested in the occurrence of different types of protests, and the risk of declining support for democracy in Latin America, should governments fail to respond to the demands of their citizens.This working paper is a draft version of a forthcoming book chapter in: South America, Central America and the Caribbean 2022 Regional Survey 2024 (Routledge