A Partial General Equilibrium Analysis of Fiscal Policy Injection on Poverty and Inequality in South Africa

Authors

  • Kambale Kavese
  • Andrew Phiri

Keywords:

Social accounting matrix (SAM); Computable General Equilibrium (CGE); New Development Plan (NDP); Inequality; Poverty

Abstract

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.

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Published

2020-05-26

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Section

Business Administration and Business Economics