Industry Structure and Labour Market Flexibility in the South African Manufacturing Sector: A Time Series and Panel Data Approach

Our investigation of industry structure in South African manufacturing reveals evidence of imperfect competition. We find an average mark-up of 50% for the period 1970 to 2004. Results suggest that there is no consistent trend in the mark-up over time. This paper extends the analysis of industry structure by linking it to labour market flexibility. We infer the proportion of labour cost that is fixed rather than flexible from the mark-up, and find that two thirds of total labour employed in South African manufacturing is devoted to fixed costs. We find that this proportion falls during the 1980s and rises during the 1990s, suggesting an increase in labour flexibility followed by a decrease.