The persistence of apartheid regional wage disparities in South Africa

Gibson Mudiriza () and Lawrence Edwards
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Gibson Mudiriza: University of Cape Town

No 115, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: Despite the ending of apartheid, regional wage disparities remain prevalent in South Africa with the former homelands characterised by persistently low wages and incomes. In this paper, we use a new economic geography (NEG) model to estimate the extent to which the persistence in apartheid regional wage disparities are an outcome of economic forces such as access to markets. We estimate a structural wage equation derived directly from the NEG theory for 354 regions over the period 1996 to 2011. We find support for the NEG model in explaining regional wage disparities across regions in South Africa, although the market access effects are highly localised in view of high distance coefficients. We also find a wage deficit in homeland areas even after controlling for NEG and other region-specific characteristics. Average wages of workers in homeland areas were 11.8% lower than predicted in 1996, with this gap rising to 13.3% in 2011. This gap remains using alternative estimation approaches and the inclusion of controls for infrastructure, removal of incentives under the deconcentration policies and local amenities.

Keywords: Economic geography; labour market; Wage differentials; regional economic activity; Economic development (search for similar items in EconPapers)
JEL-codes: J31 J71 N37 R12 R23 (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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https://ersawps.org/index.php/working-paper-series/article/view/115/89 First version, 2024 (application/pdf)

Related works:
Journal Article: The persistence of apartheid regional wage disparities in South Africa (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:rza:ersawp:115

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