South African Job Creation, a Myth or Reality? The Role of Economic Injections as a Solution to the Employment Issues
Abstract
The paper investigated the effect of economic injections components (exports, government expenditure and domestic investment) on South African employment growth. The study employed quarterly secondary data for the period 2002-2021. The ARDL, ECM and Granger causality approaches were utilised to determine the long run, short-run and causality relationships amongst variables. The results indicated that the long-run growth in both exports and government expenditure leads to employment growth whilst a rise in domestic investment reduces employment levels. Irrespective of long run results, the domestic investment significantly creates jobs in the short term. Additionally, the study results suggested a bidirectional causality between employment exports and a unidirectional from government spending towards employment. Based on the aforementioned results, the study concluded that economic injections play a crucial role in curbing unemployment growth in South Africa. Therefore, the South African government should induce and strengthen exports oriented policies and increase its spending on production-related activities rather than consumption expenditure.
References
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Habanabakize, T., & Muzindutsi, P. F. (2015). Time series analysis of interaction between aggregate expenditure and job creation in South Africa. Journal of Governance and Regulation, 4(4), 649-657.
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Kiyota, K. 2011. Trade and employment in Japan. OECD Trade Policy Working Papers, 127. OECD Publishing.
Krishna, K. & Perez, A.C. 2005. Unbalance Growth. Canadian Journal of Economics 38: 832–51.
Krugman, P & Wells, R. 2015. Macroeconomics. 4th edition. New York: Worth Publishers.
Kyer, B. L. & Maggs, G. E. (2011). Macroeconomic hydraulics reconsidered: Teaching leakages and injections from the classical perspective. Journal of Economics and Finance Education, 10(1), 14-18.
Lee, J. C., Won, Y. J. & Jei, S. Y. (2019). Study of the relationship between government expenditures and economic growth for China and Korea. Sustainability, 11(22), 6344.
Leigh, A. & Neill, C. 2011. Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program. Economics Letters, 113(2):150- 153.
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Makris, l. A. & Stavroyiannis, S. 2019. Short and long-run linear and nonlinear causality between FDI and GDP for the US. International Journal of Economics and Business Research 18: 466–79.
Menegaki, A. N. (2019). The ARDL method in the energy-growth nexus field; best implementation strategies. Economies, 7(4), 1-16.
Meyer, D. F., & Sanusi, K. A. (2019). A Causality Analysis of the Relationships Between Gross Fixed Capital Formation, Economic Growth and Employment in South Africa. Studia Universitatis Babes-Bolyai Oeconomica, 64(1), 33-44.
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Nguyen, T. K.2015. Manufacturing exports and employment generation in Vietnam. Southeast Asian Journal of Economics, 3(2):1-21.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621-634.
Pesaran, M.H. & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. Econometric Society Monographs, 31, 371-413.
Pesaran, M.H., Shin, Y. & Smith, R. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
Psaltopoulos, D., Skuras, D. & Thomson, K.J. 2011. Employment effects of private investment initiatives in rural areas of southern Europe: a regional SAM approach. Agricultural Economic Review, 12 (1):50-61.
Rangasamy, L. (2009). Exports and economic growth: The case of South Africa. Journal of International Development: The Journal of the Development Studies Association, 21(5), 603-617.
Samuelson, P. A. (1948). International trade and the equalisation of factor prices. The Economic Journal, 58(230), 163-184.
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Voulgaris, F., Papadogonas, T. & Agiomirgianakis, G. 2005. Job creation and job destruction in Greek manufacturing. Review of Development Economics, 9(2):289-301.
Wanjala, B. M., & Were, M. (2009). Gender disparities and economic growth in Kenya: A social accounting matrix approach. Feminist Economics, 15(3), 227-251.
Wong, M. F., Chang K. F., Yong C. Y. & Cheng, L.S. 2019. Macroeconomic policy and exchange rate impacts on the foreign direct investment in ASEAN economies. International Journal of Economic Policy in Emerging Economies, 12: 1–10.
World Bank. 2019. Unemployment, Total (% of Total Labor Force). Available online: http://data.worldbank.org/indicator. Date of access: 29 Apr. 2021.
Yoshino, N., Tetsuro, M. & Taghizadeh-Hesary, F. 2019. Optimal fiscal policy rule for achieving fiscal sustainability: The Japanese case. Global Business and Economics Review, 21: 156–73.
Afolayan, O.T., Okodua,H., Oluwatoyin M. & Osabohien, R. 2019. Reducing Unemployment Malaise in Nigeria: The Role of Electricity Consumption and Human Capital Development. International Journal of Energy Economics and Policy, 9: 63–73.
Afonso, A. & Sousa, R.M. 2012. The macroeconomic effects of fiscal policy. Applied Economics, 44(34):439–454.
Amjad, R. 2005. Pakistan‟s Poverty Reduction Strategy: Why Employment Matters. The Lahore Journal of Economics, (10):144-178.
Aswicahyono, H., Brooks, D.H. & Manning, C. 2014. Exports and employment in Indonesia: The decline in labour-intensive manufacturing and the rise of services. Working paper series, 279. Asian Development Bank.
Banda, H., Ngirande, H. & Hogwe, F. 2016. The impact of economic growth on unemployment in South Africa: 1994–2012. Investment Management and Financial Innovations, 13: 246–55.
Bobeica, E., Esteves, P. S., Rua, A. & Staehr, K. 2016. Exports and domestic demand pressure: a dynamic panel data model for the euro area countries. Review of World Economics, 152(1), 107-125.
Boianovsky, M. 2015. Beyond capital fundamentalism: Harrod, Domar and the history of development economics. Cambridge Journal of Economics, 42: 477–504.
Byiers, B., Kratke, F., Jayawardena, P., Rodriguez T.L. & Wijesinha, A. 2015. Manufacturing progress? Employment creation in Sri Lanka. London: ODI development progress.
Chaudhary, M. A. 1994. Foreign Debt, Dependency, and Economic Growth in South Asia. The Pakistan Development Review, 39: 551–70.
Chipaumire, G., Ngirande, H., & Ruswa, Y. 2014. The impact of government spending on economic growth: case South Africa. Mediterranean Journal of Social Sciences, 5(1), 109.
Cray, A., Nguyen, T., Pranka, C., Schildt, C., Sheu, J., & Whitcomb, E. R. 2011. Job Creation: A Review of policies and strategies. IRLE Working paper, 11(105):1-57.
Dizaji, M. & Badri, A. K. 2014. The Effect of Exports on Employment in Iran‟s Economy. Merit Research Journal of Art, Social Science and Humanities, 2(6):081-088.
du Plessis, S, and Ben Smit. 2006. Economic Growth in South Africa since 1994. Stellenbosch Working Paper Series No. WP01/2006. Stellenbosch: Economic Research Southern Africa.
Ebrahim, A., Leibbrandt, M. & Ranchhod, V. 2017. The effects of the employment tax incentive on South African employment (No. 2017/5). WIDER Working Paper. UNU-WIDER.
Edwards, E. O. 1959. Classical and Keynesian Employment Theories: A Reconciliation. Quarterly Journal ofEconomics 73: 407–28.
Estache A, Perrault J.F. & Savard, L. 2012. Impact of infrastructure spending in Sub-Saharan Africa: CGE modelling approach. Working paper, 08-03. Sherbrooke: Université de Sherbrooke.
Ezell, S.J. 2012. Boosting exports, jobs, and economic growth by expanding the ITA. Information Technology and Innovation Foundation. http://www2.itif.org/2012- boosting-exports-jobs-expanding-ita.pdf Date of access: 10 April. 2021.
Feenstra, R. C., Ma, H. & Xu, Y. 2019. US exports and employment. Journal of International Economics, 120, 46-58.
Feenstra, R.C. & Hong, C. 2007. Chang Hong China's exports and employment. NBER working paper No. 13552. Cambridge.
Granger, C.W. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: Journal of the Econometric Society, 424-438.
Habanabakize, T. 2016. A cross-sector analysis of the interaction between aggregate expenditure and job creation in South Africa. Vanderbijlpark, North-West University (Masters dissertation).
Habanabakize, T., & Muzindutsi, P. F. (2015). Time series analysis of interaction between aggregate expenditure and job creation in South Africa. Journal of Governance and Regulation, 4(4), 649-657.
Habanabakize, T., Meyer, D. F., & Oláh, J. (2019). The Impact of Productivity, Investment and Real Wages on Employment Absorption Rate in South Africa. Social Sciences, 8(12), 330.
Holden, S. & Sparrmany, V. 2016. Do government purchases affect unemployment? http://folk.uio.no/sholden/wp/fiscal-U.pdf Date of access: 11 Mar.2021.
International Labour Organisation (ILO). 2020. The impact of the COVID-19 pandemic on jobs and incomes in G20 economies. Geneva: International Labour Organisation.
Iwegbunam, I.A. (2017). Government Expenditure and Economic Growth in South Africa: Causality and Cointegration Nexus (Doctoral dissertation).
Jhingan, M. 2012. The Economics of Development and Planning, 40th ed. Delhi: Vrinda Publications (P) Ltd., vol. 28.
Kerr, A., Wittenberg, M. & Arrow, J. 2014. Job creation and destruction in South Africa. South African Journal of Economics, 82:1-30.
Keynes, J.M. (1936). The General Theory of Employment, Interest and Money. London: Macmillan.
Kimberly, A. 2019. Economic Growth, Its Measurements, Causes, and Effects. Available online: https: //www.thebalance.com/what-is-economic-growth-3306014 (accessed on 1 November 2019).
Kiyota, K. 2011. Trade and employment in Japan. OECD Trade Policy Working Papers, 127. OECD Publishing.
Krishna, K. & Perez, A.C. 2005. Unbalance Growth. Canadian Journal of Economics 38: 832–51.
Krugman, P & Wells, R. 2015. Macroeconomics. 4th edition. New York: Worth Publishers.
Kyer, B. L. & Maggs, G. E. (2011). Macroeconomic hydraulics reconsidered: Teaching leakages and injections from the classical perspective. Journal of Economics and Finance Education, 10(1), 14-18.
Lee, J. C., Won, Y. J. & Jei, S. Y. (2019). Study of the relationship between government expenditures and economic growth for China and Korea. Sustainability, 11(22), 6344.
Leigh, A. & Neill, C. 2011. Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program. Economics Letters, 113(2):150- 153.
Limosani, M. & Monteforte, F. 2017. Increasing returns and unemployment: An assessment of their relative importance in structural change. International Journal of Economic Policy in Emerging Economies, 10: 129–52.
Maisonnave, H., Mabugu, R., Chitiga, M. & Robichaud, V. 2013. Analysing Job Creation Effects of Scaling Up Infrastructure Spending in South Africa. Cahier de recherche/Working paper, 10(13):1-28.
Makris, l. A. & Stavroyiannis, S. 2019. Short and long-run linear and nonlinear causality between FDI and GDP for the US. International Journal of Economics and Business Research 18: 466–79.
Menegaki, A. N. (2019). The ARDL method in the energy-growth nexus field; best implementation strategies. Economies, 7(4), 1-16.
Meyer, D. F., & Sanusi, K. A. (2019). A Causality Analysis of the Relationships Between Gross Fixed Capital Formation, Economic Growth and Employment in South Africa. Studia Universitatis Babes-Bolyai Oeconomica, 64(1), 33-44.
Nepram, D., Singh, S. P., & Jaman, S. (2021). The Effect of Government Expenditure on Unemployment in India: A State Level Analysis. The Journal of Asian Finance, Economics and Business, 8(3), 763-769.
Nguyen, T. K.2015. Manufacturing exports and employment generation in Vietnam. Southeast Asian Journal of Economics, 3(2):1-21.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621-634.
Pesaran, M.H. & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. Econometric Society Monographs, 31, 371-413.
Pesaran, M.H., Shin, Y. & Smith, R. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289-326.
Psaltopoulos, D., Skuras, D. & Thomson, K.J. 2011. Employment effects of private investment initiatives in rural areas of southern Europe: a regional SAM approach. Agricultural Economic Review, 12 (1):50-61.
Rangasamy, L. (2009). Exports and economic growth: The case of South Africa. Journal of International Development: The Journal of the Development Studies Association, 21(5), 603-617.
Samuelson, P. A. (1948). International trade and the equalisation of factor prices. The Economic Journal, 58(230), 163-184.
Shi, A. & Michelitsch, R. 2013. Assessing private sector contributions to job creation: IFC open source study. IFC,Washington.
Sousa, N., Rueda-Cantouche, J., Arto, I. & Andreoni, V. 2012. Extra-EU exports and employment. DG Trade Chief Economist Note: European Commission.
South Africa History Online. 2019. Society and Politics. Available online: https://www.sahistory.org.za/. Date of access, 28 Apr. 2021.
South Africa. 2017. Expanded Public Works Programme (EPWP) of South Africa (Phase 3). https://www.parliament.gov.za/storage/app/media/ProjectsAndEvents/2017_ncop_provincial_week_october/docs/EPWP_as_a_Catalyst_for_Development-Mr_Dladla.pdf. Date of access, 28 Apr. 2021.
Statistics south Africa (S TATS SA). 2021. Quarterly Labour Force Survey (QLFS). http://www.statssa.gov.za/?p=14031. Date of access, 28 Apr. 2021.
Statistics South Africa. 2019. Economic Data Base. Available online: http://www.statssa.gov.za/. Date of access: 29 Apr. 2021.
Suleiman, S. H., Kassim, S.T. & Hemed, I.M. 2017. Unemployment and Economic Growth in Tanzania. Journal of Economics, Management and Trade, 20: 1–8.
Taraki, S. A. & Mesut, M. A. 2019. Capital Formation and Economic Development. International Journal of Science and Research, 8: 772–80.
Tcherneva, P.R. 2008. Keynes's approach to full employment: aggregate or targeted demand? Working Paper 542: Levy Economics Institute.
The Presidency 2017. Public-Private Growth Initiative believe high-growth South Africa is within reach. http://www.thepresidency.gov.za/press-statements/public-private-growth-initiative-believe-high-growth-south-africa-within-reach. Date of access, 28 Apr. 2021.
Todaro, M. P. & Smith, S.C. 2006. Economic Development, 8th ed. Reading: Addison-Wesley.
Voulgaris, F., Papadogonas, T. & Agiomirgianakis, G. 2005. Job creation and job destruction in Greek manufacturing. Review of Development Economics, 9(2):289-301.
Wanjala, B. M., & Were, M. (2009). Gender disparities and economic growth in Kenya: A social accounting matrix approach. Feminist Economics, 15(3), 227-251.
Wong, M. F., Chang K. F., Yong C. Y. & Cheng, L.S. 2019. Macroeconomic policy and exchange rate impacts on the foreign direct investment in ASEAN economies. International Journal of Economic Policy in Emerging Economies, 12: 1–10.
World Bank. 2019. Unemployment, Total (% of Total Labor Force). Available online: http://data.worldbank.org/indicator. Date of access: 29 Apr. 2021.
Yoshino, N., Tetsuro, M. & Taghizadeh-Hesary, F. 2019. Optimal fiscal policy rule for achieving fiscal sustainability: The Japanese case. Global Business and Economics Review, 21: 156–73.
Published
2021-06-24
How to Cite
Habanabakize, T., & Dickason, Z. (2021). South African Job Creation, a Myth or Reality? The Role of Economic Injections as a Solution to the Employment Issues: Array. Acta Universitatis Danubius. Œconomica, 17(5). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/1117
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Business Administration and Business Economics
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