Trade induced unemployment - The case of post-apartheid South Africa

Description

This paper analyses the link between trade liberalisation and increasing unemployment in post-apartheid South Africa. Since the beginning of the 1990s the South African economy became more exposed to the global economy. From 1993 until 2006 both export and import shares increased steadily over time and South Africa (re)integrated in the world economy. Simultaneously, the newly elected multi-racial government faced a sharp increase of unemployment rates. Within the time span of five years the official rate of unemployment doubled. Although this is not the first research with regard to this topic, it is one of the few that uses a consistent trade framework. By means of a binding minimum wage the impact of trade liberalisation on unemployment can be analysed theoretically in an Heckscher-Ohlin framework. These theoretical insights are used to specify an econometric estimation function. Unfortunately, it is not possible to estimate the direct impact due to data limitations. Therefore, the econometric model tests the theoretical hypothesis in an indirect way and focusses on the impact of trade liberalisation on the factor input vectors for different industries and the effect of unemployment on this change. The econometric results support the findings of the theoretical model, which implies that trade liberalisation did increase unemployment in South Africa. Whereas further liberalisation would deepen the unemployment crisis in South Africa, labour market and social reforms could overcome the negative effect of trade liberalisation.

Period	5 Sept 2011 → 7 Sept 2011
Event title	Economic Society of South Africa (ESSA) 2011 Conference
Event type	Unknown
Degree of Recognition	International