A Partial General Equilibrium Analysis of Fiscal Policy Injection on Poverty and Inequality in South Africa
Keywords:
Social accounting matrix (SAM); Computable General Equilibrium (CGE); New Development Plan (NDP); Inequality; PovertyAbstract
This study employs a partial general equilibrium approach calibrated on the Social Accounting
Matrix (SAM) and a contemporaneous dynamic computable general equilibrium (CGE) model to assess the effect
of expansionary fiscal policy on economic growth, income inequality, poverty, employment and inequality
reduction in South Africa. The simulation results reveal that expansionary fiscal policy i) benefits rich ‘white’
households the most and poor ‘coloured’ households the least ii) improves adult employment more than youth
employment iii) improves employment in urban areas as proposed to employment in rural areas iv) has a very
small effect on improving economic growth and reducing the Gini coefficient v) benefits ‘well -off’ households
more than it does ‘poor’ households vi) promotes ‘low-skilled’ employment more than it does for ‘high-skilled’
labourers. Associated policy implications based on our findings are also discussed.
References
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Bonga-Bonga, L.; Erero, J-L. & Gupta, R. (2016). Impact of Activity Tax in the Property Owning and
Subletting of Fixed Property Sectors on the South African Economy: A CGE Analysis. Journal of
Real Estate Literature 24(2) 345-357.
Collins, A.; Ishizaka, A. & Snowball, J. (2019). Film production incentives, employment
transformation and domestic expenditure in South Africa: visualizing subsidy effectiveness.
International Journal of Cultural Policy 25(2) 204-217.
Decaluwé, L.; Savard, L. & Thorbecke, E. (2005). General Equilibrium Approach for Poverty
Analysis: With an Application to Cameroon. African Development Review 17(2) 213-243.
Dervis, K.; de Melo, J. & Robinson, S. (1982). General Equilibrium Models for Development Policy.
Cambridge University Press.
Donzelli, F. (2006). Walras and Pareto on the Meaning of the Solution Concept in General Equilibrium
Theory. International Review of Economics 53 491-530.
Erero, J. (2016. National minimum wage in South Africa: A computable general equilibrium model
analysis. Economic Research Southern Africa (ERSA) Working Paper 650. November.
Erero, J. & Gavin E. (2015). The Impact of the Dividend Tax in South Africa: A Dynamic CGE
Model Analysis. Economic Research Southern Africa (ERSA) Working Paper 544 August.
Humphrey T. (1997). Algebraic Production Functions and Their Uses Before Cobb-Douglas. Federal
Reserve Bank of Richmond Economic Quarterly 83(1) 51-83.
ILO (2015).The employment dimension of infrastructure investments A guide for employment impact
assessment. Employment Sector Employment Working Paper No 178. Geneva.
Kehoe. T. (1998). Social Accounting Matrices and Applied General Equilibrium Models. I Begg and
S G B Henry (editors). Applied Economics and Public Policy. Cambridge: Cambridge University
Press 59-87.
Herault, N. (2006). Building and linking a microsimulation model to a CGE model for South Africa.
South African Journal of Economics 74(1) 34-58.
Löfgren, H.; Harris R. & Robinson, S. (2002). A standard computable general equilibrium (CGE) in
GAMS: Microcomputers in policy research. International Food Policy Research Institute (IFPRI).
Mabugu, R.; Robichaud, V.; Maisonnave, H. & Chitiga, M. (2013). Impact Of Fiscal Policy In An
Intertemporal Cge Model For South Africa. Economic Modelling 31 775-782.
Quantec Research (Pty) Ltd (2012). South African standardised industry indicator database. Sources
and description. Unpublished paper.
Shoven, J. & Whalley, J. (1992.). Applying General Equilibrium. Cambridge University Press.
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51
Shoven, J. & Whalley, J. (1984). Applied General-Equilibrium Models of Taxation and International
Trade: An Introduction and Survey. Journal of Economic Literature 22(3) 1007-1051.
Taylor, L. & Black, S. (1974). Practical general equilibrium estimation of resources pulls under trade
liberalization. Journal of International Economics 4(1) 37-58.
United Nations (2009). A System of National Accounts 2008 (SNA 2008). Jointly published by United
Nations. European Commission. International Monetary Fund. Organisation for Economic Cooperation
and Development. World Bank. New York.
van Wyk, L.; Saayman, M.; Rossouw, R. & Saayman, A. (2014). Regional economic impacts of
events: A comparison of methods. South African Journal of Economic and Management Sciences
18(2) 155-176.
World Bank (2014). South Africa economic update: fiscal policy and redistribution in an unequal
society. World Bank. Washington: DC.
Opening a Black Box. ZEW Discussion Paper No 03-56. Mannheim: Zentrum für Europäische
Wirtschaftsforschung (ZEW).
Bonga-Bonga, L.; Erero, J-L. & Gupta, R. (2016). Impact of Activity Tax in the Property Owning and
Subletting of Fixed Property Sectors on the South African Economy: A CGE Analysis. Journal of
Real Estate Literature 24(2) 345-357.
Collins, A.; Ishizaka, A. & Snowball, J. (2019). Film production incentives, employment
transformation and domestic expenditure in South Africa: visualizing subsidy effectiveness.
International Journal of Cultural Policy 25(2) 204-217.
Decaluwé, L.; Savard, L. & Thorbecke, E. (2005). General Equilibrium Approach for Poverty
Analysis: With an Application to Cameroon. African Development Review 17(2) 213-243.
Dervis, K.; de Melo, J. & Robinson, S. (1982). General Equilibrium Models for Development Policy.
Cambridge University Press.
Donzelli, F. (2006). Walras and Pareto on the Meaning of the Solution Concept in General Equilibrium
Theory. International Review of Economics 53 491-530.
Erero, J. (2016. National minimum wage in South Africa: A computable general equilibrium model
analysis. Economic Research Southern Africa (ERSA) Working Paper 650. November.
Erero, J. & Gavin E. (2015). The Impact of the Dividend Tax in South Africa: A Dynamic CGE
Model Analysis. Economic Research Southern Africa (ERSA) Working Paper 544 August.
Humphrey T. (1997). Algebraic Production Functions and Their Uses Before Cobb-Douglas. Federal
Reserve Bank of Richmond Economic Quarterly 83(1) 51-83.
ILO (2015).The employment dimension of infrastructure investments A guide for employment impact
assessment. Employment Sector Employment Working Paper No 178. Geneva.
Kehoe. T. (1998). Social Accounting Matrices and Applied General Equilibrium Models. I Begg and
S G B Henry (editors). Applied Economics and Public Policy. Cambridge: Cambridge University
Press 59-87.
Herault, N. (2006). Building and linking a microsimulation model to a CGE model for South Africa.
South African Journal of Economics 74(1) 34-58.
Löfgren, H.; Harris R. & Robinson, S. (2002). A standard computable general equilibrium (CGE) in
GAMS: Microcomputers in policy research. International Food Policy Research Institute (IFPRI).
Mabugu, R.; Robichaud, V.; Maisonnave, H. & Chitiga, M. (2013). Impact Of Fiscal Policy In An
Intertemporal Cge Model For South Africa. Economic Modelling 31 775-782.
Quantec Research (Pty) Ltd (2012). South African standardised industry indicator database. Sources
and description. Unpublished paper.
Shoven, J. & Whalley, J. (1992.). Applying General Equilibrium. Cambridge University Press.
ISSN: 2065-0175 OECONOMICA
51
Shoven, J. & Whalley, J. (1984). Applied General-Equilibrium Models of Taxation and International
Trade: An Introduction and Survey. Journal of Economic Literature 22(3) 1007-1051.
Taylor, L. & Black, S. (1974). Practical general equilibrium estimation of resources pulls under trade
liberalization. Journal of International Economics 4(1) 37-58.
United Nations (2009). A System of National Accounts 2008 (SNA 2008). Jointly published by United
Nations. European Commission. International Monetary Fund. Organisation for Economic Cooperation
and Development. World Bank. New York.
van Wyk, L.; Saayman, M.; Rossouw, R. & Saayman, A. (2014). Regional economic impacts of
events: A comparison of methods. South African Journal of Economic and Management Sciences
18(2) 155-176.
World Bank (2014). South Africa economic update: fiscal policy and redistribution in an unequal
society. World Bank. Washington: DC.
Published
2020-05-26
How to Cite
Kavese, K., & Phiri, A. (2020). A Partial General Equilibrium Analysis of Fiscal Policy Injection on Poverty and Inequality in South Africa: Array. Acta Universitatis Danubius. Œconomica, 16(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/206
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Business Administration and Business Economics
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