Residential segregation matters to racial income gaps: Evidence from South Africa

Florent Dubois () and Christophe Muller
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Florent Dubois: University of Reading, Reading, United Kingdom and EconomiX, University Paris Nanterre, 92000 Nanterre, France, https://www.reading.ac.uk/search/search-staff-details.aspx?id=26908

No 2205, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We contend that residential segregation should be an essential component of the analyses of socio-ethnic income gaps. Focusing on the contemporary White/African gap in South Africa, we complete Mincer wage equations with an Isolation index that reflects the level of segregation in the local area where individuals dwell. We decompose the income gap distribution into detailed composition and structure components. Segregation is found to be the main contributor of the structure effect, ahead of education and experience, and to make a sizable contribution to the composition effect. Moreover, segregation is found to be harmful at the bottom of the African income distribution, notably in relation to local informal job-search networks, while it is beneficial at the top of the White income distribution. Specific subpopulations are identified that suffer and benefit most from segregation, including for the former, little educated workers in agriculture and mining, often female, confined in their personal networks. Finally, minimum wage policies are found likely to attenuate most segregation’s noxious mechanisms, while a variety of policy lessons are drawn from the decomposition analysis by distinguishing not only compositional from structural effects, but also distinct group-specific social positions.

Keywords: residential segregation; post-apartheid South Africa; distribution analysis; generalized decompositions (search for similar items in EconPapers)
JEL-codes: D31 J15 R23 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2022-03
New Economics Papers: this item is included in nep-agr, nep-dev, nep-lab and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:2205

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