Describing and decomposing post-apartheid income inequality in South Africa

Literature › Works

Murray Leibbrandt; Arden Finn; Ingrid Woolard (2012). Describing and decomposing post-apartheid income inequality in South Africa. Development Southern Africa 29(1). Routledge (Taylor & Francis).

Type	journal article
Scope	Post-1994 South African economy
Method	descriptive quantitative
Period studied	1993–2008
Regions	South Africa
Themes	inequality poverty unemployment, transition post apartheid, labour markets wages, methods data sources, education human capital
Citation key	leibbrandt2012

Argument

Comparing the 1993 PSLSD and the 2008 NIDS household surveys, the paper shows that South African income inequality rose after apartheid, with a growing share of income going to the top decile. Labour market income, driven by unemployment and unequal earnings, accounts for the great majority of aggregate inequality in both years. Social grants have become central to the incomes of the bottom deciles but have almost no effect on measured inequality. Within-race inequality has grown, and the between-race component has fallen on both conventional and new (Elbers et al.) measures, although it remains very high. The authors argue this through data-comparability adjustments, Lorenz and Gini comparisons, Shorrocks-style Gini source decomposition and generalised entropy decompositions.

Evidence and method

Two nationally representative household surveys: the 1993 Project for Statistics on Living Standards and Development (PSLSD) and the 2008 wave 1 of the National Income Dynamics Study (NIDS). Per capita household income excluding implied rent and agricultural income. Bootstrapped standard errors. Secondary sources: Leibbrandt and Levinsohn (2011), Bhorat and Van der Westhuizen (2009), Elbers et al. (2008).

Findings

• Income has become concentrated in the top decile, and the poorest half's share fell. (p. 5)

  in 2008 the wealthiest 10% accounted for 58% of total income.

• The cumulative income share of the poorest half declined slightly. (p. 5)

  the cumulative share of income accruing to the poorest 50% dropped from 8.32% in 1993 to 7.79% in 2008.

• Grants became the dominant income source for the poorest decile, partly crowding out remittances. (p. 5)

  For the poorest decile, the share of government grants increased from 15% in 1993 to about 73% in 2008.

• Lorenz curves do not cross, so 2008 is unambiguously more unequal than 1993. (p. 8)

  the curves do not cross at any stage, with the 2008 curve lying further away from the 458 line of perfect equality.

• Grants reach poorer households but have virtually no effect on measured inequality, probably because they move recipients into the lower-middle of the distribution. (p. 10)

  it appears that state grants had virtually no effect on overall inequality in the country

• Remittances shifted from equalising to slightly inequality-increasing, with fewer households receiving them, possibly linked to rising unemployment. (p. 10)

  the percentage of households receiving remittance income falls from 24% to 14%.

• The within-race share of inequality grew, so between-race inequality is a shrinking component. (p. 12)

  inequality within racial groups made up about 48% of overall inequality in 1993 and that this had increased to almost 62% by 2008.

• Using the Elbers et al. maximum-possible benchmark, between-group inequality fell substantially but remains high. (p. 14)

  the new measure shows that the income distribution in South Africa in 2008 was almost 50% of the way to being as unequal as it possibly could be

• Labour demand favours the educated, leaving those without grants or schooling at the bottom. (p. 16)

  Those left at the bottom of the distribution in post-apartheid South Africa are those who do not have access to social grants nor the education levels necessary to integrate successfully into a harsh labour market.