Coordination Failure and Employment in South Africa

David Fryer and Désiré Vencatachellum ()
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Désiré Vencatachellum: HEC Montreal, Université de Montréal

Working Papers from University of Cape Town, Development Policy Research Unit

Abstract: South Africa lost more than 890,000 jobs, but saw an increase in the number of skilled workers from 1989 to 1999. We argue that this is the consequence of well-documented acute apartheid-era distortions which led to a current coordination failure where (i) firms are locked into a mostly skillintensive technology where they have very little demand for semi-skilled and unskilled labour, and (ii) there are too few semi-skilled and skilled blacks. It follows that the average level of blacks human capital is too low for firms to adopt a technology which makes intensive use of less skilled workers in the production process. A firm cannot unilaterally change technology because current skilled (mostly white) workers would lose and move to other firms. All of this points to a missing market for semi-skilled workers. Wealth redistribution and public investments in both the quantity and quality of education are shown to be Pareto-improving.

Keywords: South Africa: Employment; Human Capital; Coordination Failure; Apartheid (search for similar items in EconPapers)
JEL-codes: J48 O14 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-06
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Citations: View citations in EconPapers (1)

Published in Working Paper Series by the Development Policy Research Unit, June 2004, pages 1-28

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Persistent link: https://EconPapers.repec.org/RePEc:ctw:wpaper:04086

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