Latest News, Publications and Workshops

Latest Publications

Factors influencing people’s perceptions towards conservation of transboundary wildlife resources. The case of the Great-Limpopo Trans-frontier Conservation Area

Local people’s perceptions of protected areas greatly determine the success of conservation efforts in Southern Africa as these perceptions affect people’s attitudes and behaviour in respect to conservation. As a result, the involvement of local communities in transboundary wildlife conservation is now viewed as an integral part of regional development initiatives.

Real Exchange Rate Volatility and Employment Growth in South Africa: The Case of Manufacturing

Trust R. Mpofu and Eftychia Nikolaidou
South Africa has one of the highest unemployment rates in the world. This remains one of the key concerns to the policymakers in South Africa. Although there is a vast literature that examines the cause of high unemployment rates from a microeconomic perspective, there is limited work on this issue from a macroeconomic perspective. Exchange rate movements are expected to impact employment (and, indirectly, unemployment) through the profitability of the sector in export-oriented activities. This is so because exchange rate volatility changes the production costs of firms, and thus, causes uncertainty of future earnings. This affects investment decisions as well as employment because hiring workers represents an investment in the sense that there are costs incurred to reversing this decision.

The study investigates the effect of real exchange rate volatility on employment growth in South Africa, a country that is characterised by high rates of unemployment and relatively high exchange rate volatility. The study focuses on manufacturing sector because it is a major source of employment expansion in South Africa given that it has a large number of unskilled workers. As such, the poor performance of the manufacturing sector contributes significantly to South Africa’s unemployment problem. Employing the Autoregressive Distributed Lag (ARDL) cointegration approach over the period 1995 to 2015, results show that the increase in real exchange rate volatility reduces manufacturing employment growth and that the appreciation of the real exchange rate level reduces manufacturing employment growth. So, the findings suggest that the negative developments in South Africa’s labour market can be partly attributed to the exchange rate fluctuations. The results also show that manufacturing exports have a significant negative effect on manufacturing employment growth. Furthermore, manufacturing output, manufacturing wages and long-term interest rates have significant effects on manufacturing employment growth.
 
The findings of the study have important implications for future policy design. One of the policy conclusions based on the results in this paper is that suppressing exchange rate volatility should bring substantial benefits in the manufacturing sector in South Africa. The results between manufacturing exports and employment growth, suggest that South African government would benefit in re-structuring its exports to have positive effects on manufacturing employment growth in the long-run.

Measuring the Financial Cycle in South Africa

Greg Farrell and Esti Kemp
This paper sets out to measure the financial cycle in South Africa. Financial cycles provide a broad perspective on the evolution of risks to financial stability, and therefore provide a useful monitoring tool for policymakers who are required to set macroprudential policies. A robust measure of the financial cycle is currently particularly important for South African policymakers, given the renewed emphasis on the financial stability regulatory and supervisory framework provided by the Financial Sector Regulation Act, which was signed into law in September 2017. Understanding financial cycles is viewed as critical for informing the use of countercyclical macroprudential policy, but there is no consensus regarding the definition of financial cycles nor on the methodology that should be employed to measure them. Despite a large and growing international literature, we are also not aware of published research that assesses the options available for measuring the South African financial cycle.

To fill this gap, we propose identifying the main characteristics of the financial cycle in South Africa using three different approaches. First, we apply traditional turning point analysis to identify the financial cycle by detecting peaks and troughs in the individual component variables that make up the cycle. Second, we employ a frequency domain approach that uses band-pass filters to isolate the cycles that correspond to medium-term frequency intervals. Third, we use a multivariate model-based approach to extract cycles using unobserved components time series models. We then provide a comparison of the results of the three approaches, and compare the estimates of the financial cycle with those of the business cycle to determine whether the cycles are distinct from one another. We begin, however, by defining financial cycles and selecting a set of financial variables that can potentially capture the main characteristics of the South African financial cycle.
 
Financial cycles provide a broad indication of the change in risks to financial stability and therefore provide an important monitoring tool for policymakers. Allowing for the phase of a country’s financial cycle is also important when implementing macroprudential policy, given that the impact of policies may differ depending on the phase of the cycle. An understanding of financial cycles is therefore a key element informing macroprudential policymaking.

Teacher Pay and Educational Outcomes: Evidence from the Rural Hardship Allowance in Zambia

This paper studies the effect of unconditional teacher salary increases on teacher and student outcomes. To study the issue, we evaluate the rural hardship allowance in Zambia, which corresponds to a salary increase of 20%. This allowance is allocated to schools on the basis of a distance criterion allowing us to use a regression discontinuity design. We use administrative data from 2004 to 2015 on school and teacher characteristics and on test scores. In addition, we perform a telephone survey of schools close to the eligibility threshold.

Family-type Public Goods and Intra-Household Decision-Making by Co-Resident South African Couples

Sevias Guvuriro & Frederik Booysen
The household is a critical decision-making and consumption unit and various crucial decisions are indeed made within households. These include decisions on day-to-day expenditures, decisions about where to live, who to live with, who should work and how to raise income, as well as where children should attend school, and how to spend the available income. However, perceiving the household as a single ‘glued-together’ unit, whose interests are as that of an individual, suggests that investigations into intra-familial issues are unnecessary, thus neglecting what actually happens within households. Employing resource theory and the theory of assortative mating in the application of the cooperative intra-household bargaining model, the current study examines the sources of bargaining power that informs financial decision-making processes by females within co-resident couples. The study also determines how bargaining power and financial decision-making of female partners in co-resident couples impact on family-type public goods expenditure.

The study uses the 2008 baseline of South Africa’s National Income Dynamics Study (NIDS). NIDS offers a direct measure of financial decision-making responsibility, has gender disaggregated data on various determinants of economic bargaining power, enables the matching of partners in co-resident couples, and has data on household expenditure that is disaggregated and allows the identification of expenses on family-type public goods. Probit regression models are used to establish key economic and non-economic determinants of the decision-making responsibility of female partners in co-resident couples. Ordinary Least Squares (OLS) linear regression models are employed to determine the extent to which bargaining and financial decision-making power impact household expenditure on family-type public goods.
 
One major finding of the study is that within-couple differentials of age, income, and employment opportunities that favour a female partner, promote their financial decision-making. Such a result is confirmed by using dummies for within-couple differences. In this sense, assortative mating promotes the even distribution of decision-making power within couples. Given the current state of affairs portrayed in the data, where males are generally better off in terms of employment income and employment opportunities, a policy that focuses on narrowing heterogamy between wives and husbands through gender mainstreaming and empowerment, would enhance the decision-making role of women within co-resident couples. Arguably, household welfare is better protected in situations of homogamy – where bargaining power is more evenly distributed, unlike in a heterogamy situation – where one partnerdominates the other in terms of bargaining power.
 
A second finding is that economic factors, in the form of income and employment status, and social factors such as age, play a critical role in positioning female partners in financial decision-making. Specifically, female partners’ employment status consistently feature as a significant influence on the probability of making decisions on day-to-day expenditure. A lesson for policy from this finding is that direct economic empowerment of females raises their decision-making responsibility within the household.
 
A third key finding is with regards to the provision of family-type public goods as financial decision-making power translates into increases in expenditure on selected family-type public goods, particularly for women. Economic empowerment of females enables them to gain decision-making responsibility, and in turn spend more on family-type public goods such as food, utilities, health care, and education.
 
There is substantial support therefore for the bargaining model of intra-household decision-making.

Latest Workshops

Skills Development

Monday, July 3, 2017 to Friday, July 7, 2017

Call for Application for Skills Development Training in Econometrics

The ERSA is pleased to invite applications for the Skill Development Training Programme in basic Econometrics for academics and postgraduate students (masters and PhD) with limited training in Econometrics and quantitative methods. The skills development initiative is in line with ERSA’s objective to deepen economic research capacity and to train young economists in Southern Africa.

7th Annual Meeting of the African Economic History Network: Innovation and the African Past

Wednesday, October 25, 2017 to Friday, October 27, 2017

The African Economic History Network, in association with the Laboratory for the Economics Africa's Past at Stellenbosch University, Harvard Univeristy's Center for African Studies and Economic Research Southern Africa announces a Call for Papers.

Lecture Series in Economic Theory: "Asymmetric Information in Markets and Organizations"

Monday, March 14, 2016 to Tuesday, March 15, 2016
In part 1 of this lecture, we are going to introduce the basic set-up of credence goods markets and discuss how markets should be designed to provide the right incentives for experts and their customers. The theoretical analysis will be complemented by the discussion of evidence of expert behaviour and market outcomes from empirical as well experimental studies. 
 
In part 2 of the lecture, the emphasis will be on information disclosure by interested parties and evidence provision by intermediaries.

The Third ERSA Political Economy Workshop

Tuesday, February 16, 2016 to Wednesday, February 17, 2016

Economic Research Southern Africa (ERSA) and the Institutions and Political Economy Group (IPEG) at the University of the Witwatersrand invite SA-based researchers with a focus on political economy, including public choice, to participate in the upcoming February 2016 workshop. Contributions, even in progress, on all political economy topics will be considered though preference will be given to: corruption, dictatorship, fiscal federalism, intergovernmental grants, political entrepreneurship, and regulation.