Asymmetric Response of Poverty to Growth and Inequality in South Africa: Implications for Current and Future Shocks
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Date
2024-04-10
Authors
Ngepah, Nicholas
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
This study investigates the effect of economic growth on poverty reduction, given
inequality in South Africa. It focuses on whether the poor suffer more losses of welfare
during economic recessions and depressions than they gain during expansions, and
the factors that can assist the poor to stay afloat during times of economic shocks.
Individuals in micro data set are matches with municipality-level data and in binary,
truncated, panel, instrumental variables, and quantile regression techniques to
estimate poverty and welfare effects of positive and negative economic growth
rates. The study finds that, while economic growth reduces poverty, it is not enough
to compensate for the poverty-raising effects of inequality. Moreover, economic
decline raises poverty, but economic prosperity more than compensates by a
higher magnitude. The study also reveals that, social grants and free health care
and education policies have limited effects on poverty reduction during economic
downturns. The findings call for policy measures that reduce inequality and promote
economic growth to help cushion the poor during times of significant economic
decline. Additionally, programmes that provide good education up to tertiary level
and access to the labour market are crucial for sustaining poverty reduction efforts
in South Africa.