A Fiscus for Better Economic and Social Development in South Africa

Francois Stofberg (), Jan van Heerden and Heinrich Bohlmann
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Francois Stofberg: Economist, Efficient Group
Jan van Heerden: Department of Economics, University of Pretoria, Pretoria, 0002, South Africa
Heinrich Bohlmann: Department of Economics, University of Pretoria, Pretoria, 0002, South Africa

No 202072, Working Papers from University of Pretoria, Department of Economics

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: C68 E16 H31 L91 R10 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2020-08
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