cite: Go2010
author: Go, D. S., Kearney, M., Korman, V., Robinson, S., & Thierfelder, K.
year: 2010
title: Wage subsidy and labour market flexibility in south africa
publisher: Journal of development studies
uri: https://doi.org/10.1080/00220380903428456
pubtype: article
discipline: development

country: South Africa
period: 2003
maxlength:
targeting: implicit
group: low-/semi-skilled workers
data: GCE model based on 2003 LM data; Pauw & Edwards (2006)

design: simulation
method: micro-simulation; multi-sector, multi-labour computable general equilibrium model
sample: 43
unit: sector
representativeness: national
causal: 0 # 0 correlation / 1 causal

theory:
limitations: potentially reduced generalizability due to simulation's assumptions
observation:
  - intervention: subsidy (wage)
    institutional: 0
    structural: 1
    agency: 0
    inequality: income
    type: 0 # 0 vertical / 1 horizontal
    indicator: 0 # 0 absolute / 1 relative
    measures: Foster-Greer-Thorbecke (FGT) poverty headcount ratio
    findings: overall decrease in FGT ratio, about 1.6% of households moving out of poverty; similar changes in urban/rural spaces; greater gains in poorer households
    channels: income gains for poorer households
    direction: -1 # -1 neg / 0 none / 1 pos
    significance: 2 # 0 nsg / 1 msg / 2 sg
  - intervention: subsidy (wage)
    institutional: 0
    structural: 1
    agency: 0
    inequality: income
    type: 0 # 0 vertical / 1 horizontal
    indicator: 0 # 0 absolute / 1 relative
    measures: Gini coeff
    findings: Overall reduction in income inequality (0.5 ppt), not significant effects
    channels: income redistribution; increased formal employment for low-/medium-skill workers
    direction: -1 # -1 neg / 0 none / 1 pos
    significance: 0 # 0 nsg / 1 msg / 2 sg

notes:
annotation: |
  A study modeling the effects of a targeted wage subsidy aimed at low- and medium-skilled workers and provided to their employers as an incentive for new job creations, looking at its effects on poverty and income inequality in South Africa.
  The study finds that, using the Gini coefficient, the overall income inequality reduced by 0.5 percentage points, which provides an insignificant outcome.
  This primarily occurs because of an overall income redistribution and especially an increase in formal employment for low- and medium-skill workers.
  Using an absolute poverty headcount ratio, it finds that a significant 1.6 per cent of households move out of poverty, with similar changes observed across urban and rural spaces.
  They attribute this primarily to income gains for poorer households and the targeting benefiting the poorest households most by providing them greater income gains.
  Limitations of the study include the general equibilibrium model approach being potentially restricted by its prior assumptions in validity and generalizability, as well as potentially not accounting for unobservables or exogenous shocks.