Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa

Servaas van der Berg ()
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Servaas van der Berg: University of Stellenbosch

No 310, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: South Africa faces the intertwined challenges of weak economic growth, persistently high poverty and extreme income inequality. This paper assesses what levels of poverty reduction and distributional change are realistically achievable over the next fifteen years under plausible growth scenarios, given binding structural and fiscal constraints. Using a stylised log-normal income distribution calibrated to 2023 data, the analysis simulates poverty outcomes under sustained per capita growth rates of 1–2 per cent (consistent with GDP growth of 2–3 per cent) and cumulative Gini reductions of 0, 2, 4 and 6 points. The results reveal a clear asymmetry. Moderate growth generates substantial reductions in poverty at both lower- and upper-bound poverty lines, while plausible medium-term reductions in inequality make a smaller incremental contribution. van der Berg, S. (2026). Poverty Reduction Under Structural Constraints: Growth, Inequality and Policy Trade-Offs in South Africa (ERSA Policy Paper No. 48). Economic Research Southern Africa. https://doi.org/10.71587/rr3y8746

Keywords: Poverty reduction; Income inequality; Economic growth; Policy instruments; Labour market structure; Fiscal sustainability; South Africa (search for similar items in EconPapers)
JEL-codes: D63 E61 I32 O11 O15 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2026-04, Revised 2026-05
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Published in ERSA Working Paper Series, April 2026, pages 39

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https://ersawps.org/index.php/working-paper-series/article/view/310/196 First version, 2026 (application/pdf)
https://ersawps.org/index.php/working-paper-series/article/view/310/196 Revised version, 2026 (application/pdf)

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