Kearney, MarnaGo, Delfin S.Korman, VijdanRobinson, ShermanThierfelder, Karen2012-03-192012-03-192009-03-01https://hdl.handle.net/10986/4066In this paper, the authors use a highly disaggregate general equilibrium model to analyze the feasibility of a wage subsidy to unskilled workers in South Africa, isolating and estimating its potential employment effects and fiscal cost. They capture the structural characteristics of the labor market with several labor categories and substitution possibilities, linking the economy-wide results on relative prices, wages, and employment to a micro-simulation model with occupational choice probabilities in order to investigate the poverty and distributional consequences of the policy. The impact of a wage subsidy on employment, poverty, and inequality in South Africa depends greatly on the elasticities of substitution of factors of production, being very minimal if unskilled and skilled labor are complements in production. The desired results are attainable only if there is sufficient flexibility in the labor market. Although the impact in a low case scenario can be improved by supporting policies that relax the skill constraint and increase the production capacity of the economy especially towards labor-intensive sectors, the gains from a wage subsidy are still modest if the labor market remains very rigid.CC BY 3.0 IGOACCOUNTINGADJUSTMENT PROCESSAGGREGATE DEMANDAGGREGATE INCOMEAGRICULTUREANNUAL EARNINGSANNUAL INCOMEANNUAL WAGEAVERAGE EARNINGSAVERAGE GROWTHAVERAGE WAGEAVERAGE WAGESBENCHMARKBENEFICIARIESCALCULATIONSCLERKSCOLLEGE DEGREECOMMODITIESCONCENTRATION RATIOSCONSUMPTION EXPENDITURESCONTRIBUTIONDEVELOPMENT POLICYDISCOURAGED WORKERSDOMESTIC WORKERSEARNINGEARNINGSECONOMETRIC ANALYSISECONOMETRIC MODELINGECONOMETRICSECONOMIC ACTIVITIESECONOMIC ACTIVITYECONOMIC ANALYSISECONOMIC FRAMEWORKECONOMIC GROWTHECONOMIC MANAGEMENTECONOMIC PERFORMANCEECONOMIC RESEARCHECONOMIC SECTORSECONOMIC STRUCTUREECONOMICSELASTICITYELASTICITY OF SUBSTITUTIONEMPLOYEEEMPLOYMENTEMPLOYMENT EFFECTEMPLOYMENT EFFECTSEMPLOYMENT GROWTHEMPLOYMENT IMPACTEMPLOYMENT IMPACTSEMPLOYMENT INCREASESEMPLOYMENT LEVELEMPLOYMENT POLICYEMPLOYMENT STATUSEMPLOYMENT TRENDSEQUILIBRIUM UNEMPLOYMENTEXCHANGE RATEEXPORTSFACTOR DEMANDFACTOR MARKETSFAMILY MEMBERFEMALE WORKERSFINANCIAL SECTORSFINANCIAL SERVICESFIRM SURVEYFORMAL LABOR MARKETFUTURE RESEARCHGDPGENERAL EQUILIBRIUMGENERAL EQUILIBRIUM ANALYSISGINI COEFFICIENTGROSS DOMESTIC PRODUCTHIGH UNEMPLOYMENTHIGH UNEMPLOYMENT RATESHOUSEHOLD CONSUMPTIONHOUSEHOLD EXPENDITUREHOUSEHOLD EXPENDITURESHOUSEHOLD INCOMEHOUSEHOLD INCOMESHOUSEHOLD SURVEYHUMAN CAPITALIMPERFECT COMPETITIONINCENTIVE EFFECTSINCOME DISTRIBUTIONINCOME GROUPINCOME GROUPSINCOME SOURCESINCOME TAXINCOME TAXESINCOMESINEQUALITYINFORMAL ECONOMYINFORMAL SECTORINFORMAL SECTOR WORKERSINVENTORYJOB SEARCHJOBSLABOR COSTLABOR COSTSLABOR DEMANDLABOR FORCELABOR FORCE GROWTHLABOR MARKETLABOR MARKET CONDITIONSLABOR MARKET FLEXIBILITYLABOR MARKET INSTITUTIONSLABOR MARKET ISSUESLABOR MARKET OUTCOMESLABOR MARKET PROBLEMSLABOR MARKET RIGIDITIESLABOR MARKET RIGIDITYLABOR MARKET SITUATIONLABOR MARKETSLABOR MOBILITYLABOR ORGANIZATIONLABOR POLICYLABOR REGULATIONSLABOR RELATIONSLABOR SUPPLYLABOR UNIONSLABOURLABOUR DEMANDLABOUR FORCELABOUR MARKETLABOUR MARKETSLEVEL OF EDUCATIONLUMP SUMMACROECONOMIC ADJUSTMENTMACROECONOMIC MANAGEMENTMACROECONOMICSMALE WORKERSMANUFACTURING INDUSTRYMARKET WAGEMARKET WAGESMARRIED COUPLESMINIMUM WAGEMINIMUM WAGESMULTIPLIERSNEW JOBNEW JOBSOCCUPATIONOCCUPATIONSOPEN ECONOMIESPAID WORKERSPENSIONPER CAPITA INCOMEPERMANENT WORKERSPOVERTY LEVELSPOVERTY RATEPOVERTY RATESPRELIMINARY EVIDENCEPRESENT ANALYSISPRESENT STUDYPRIVATE INVESTMENTPRIVATE SAVINGSPROBABILITIESPROBABILITYPRODUCTION CAPACITYPRODUCTION FUNCTIONPRODUCTION INCREASESPRODUCTION PROCESSPRODUCTIVITYPRODUCTIVITY GROWTHPUBLIC EXPENDITURESPUBLIC SERVICESREAL GDPREAL WAGEREAL WAGESRETAIL TRADERURAL POVERTYSALESSAVINGSSCALE EFFECTSSELF-EMPLOYMENTSELF-EMPLOYMENT INCOMESEMISKILLED WORKERSSENIORSERVICE SECTORSERVICE SECTORSSKILL GROUPSSKILL TYPESKILLED LABORSKILLED WORKERSOCIAL SECURITYSTRUCTURAL CHANGESTRUCTURAL UNEMPLOYMENTSUBSIDIZED JOBSUM OF MONEYTAX RATETAX REVENUESTAXATIONTECHNICAL ASSISTANCETEMPORARY WORKERSTOTAL EMPLOYMENTTOTAL LABOR FORCETOTAL WAGETRADE LIBERALIZATIONTRADE POLICIESTRAINING PROGRAMSUNEMPLOYEDUNEMPLOYED INDIVIDUALUNEMPLOYED INDIVIDUALSUNEMPLOYED PEOPLEUNEMPLOYMENTUNEMPLOYMENT PROBLEMUNEMPLOYMENT RATEUNION MEMBERSHIPUNSKILLED WORKERSVALUE ADDEDVOCATIONAL SCHOOLVOLUNTARY UNEMPLOYMENTWAGE BILLWAGE COSTWAGE DIFFERENTIALSWAGE EMPLOYMENTWAGE FLEXIBILITYWAGE GAINSWAGE INCREASESWAGE LEVELWAGE SUBSIDIESWAGE SUBSIDYWAGE SUBSIDY SCHEMEWORK EXPERIENCEWORK FORCEWORKING POORWTOWorld Bank10.1596/1813-9450-4871