A fiscus for better economic and social development in South Africa

Francois Jacobus Stofberg (), Jan Horn van Heerden () and Heinrich Bohlmann ()
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Francois Jacobus Stofberg: Efficient Group
Jan Horn van Heerden: University of Pretoria
Heinrich Bohlmann: University of Pretoria

No 100, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: After showing that the bulk of government expenditure is unproductive, we consider the impact of an alternative fiscal policy mix in South Africa. The alternative suggests freezing the real government wage bill for five years and using the savings generated by this decision to increase spending on a specific, productive and wealth-creative expenditure item, aggregate investments. By indirectly contributing to greater levels of investments we show how government can generate better levels of economic performance and social development. To analyse the economic consequences of the suggested fiscal policy mix we use TERM-SA a dynamic, regional computable general equilibrium model of South Africa. We also add additional features to provide more accurate and detailed results. Our results show that a wage freeze can increase both real GDP (5.9%) and employment (456,00 jobs) in the long-term.

Keywords: Computable general equilibrium models; households; Social accounting matrix; regional economics; policy modelling (search for similar items in EconPapers)
JEL-codes: E22 E62 H50 O11 (search for similar items in EconPapers)
Date: 2024-10
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Published in ERSA Working Paper Series, October 2024

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