Publication: Economy-wide and Distributional Impacts of an Oil Price Shock on the South African Economy
Date
2007-09
ISSN
Published
2007-09
Author(s)
Abstract
As crude oil prices reach new highs,
there is renewed concern about how external shocks will
affect growth and poverty in developing countries. This
paper describes a macro-micro framework for examining the
structural and distributional consequences of a significant
external shock-an increase in the world price of oil-on the
South African economy. The authors merge results from a
highly disaggregative computable general equilibrium model
and a micro-simulation analysis of earnings and occupational
choice based on socio-demographic characteristics of the
household. The model provides changes in employment, wages,
and prices that are used in the micro-simulation. The
analysis finds that a 125 percent increase in the price of
crude oil and refined petroleum reduces employment and GDP
by approximately 2 percent, and reduces household
consumption by approximately 7 percent. The oil price shock
tends to increase the disparity between rich and poor. The
adverse impact of the oil price shock is felt by the poorer
segment of the formal labor market in the form of declining
wages and increased unemployment. Unemployment hits mostly
low and medium-skilled workers in the services sector.
High-skilled households, on average, gain from the oil price
shock. Their income rises and their spending basket is less
skewed toward food and other goods that are most affected by
changes in oil prices.
Citation
“Essama-Nssah, B.; Go, Delfin S.; Kearney, Marna; Korman, Vijdan; Robinson, Sherman; Thierfelder, Karen. 2007. Economy-wide and Distributional Impacts of an Oil Price Shock on the South African Economy. Policy Research Working Paper; No. 4354. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/0b919cf1-cd37-552c-85a8-1e13e00aef99 License: CC BY 3.0 IGO.”
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