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Citation Information

Type Working Paper - Research Project on Employment, Income Distribution and Inclusive Growth
Title Short-run differences between static and dynamic measures of earnings inequality in South Africa
Author(s)
Issue 35
Publication (Day/Month/Year) 2017
Page numbers 1-15
URL http://www.redi3x3.org/sites/default/files/Finn & Ranchhod 2017 REDI3x3 Working Paper 35 Static and​dynamic measures of earnings inequality.pdf
Abstract
A substantial literature has evolved in South Africa over the last twenty years that has estimated the levels and trends in income and earnings inequality. The evidence is overwhelming that South Africa both was, and remains, one of the most unequal societies in the world, although most of these measures are obtained using cross-sectional data. We contribute to this literature by investigating a dynamic measure of earnings inequality, using the nationally representative QLFS panel. These are high frequency data where individuals are surveyed up to four times in a twelve month period. The key mechanism by which these might differ from cross-sectional measures is through labour market churning. Our estimates of inequality in earnings drop by a small but meaningful amount when we move from a static measure, with an average Gini coefficient of 0.626, to a one-year average earnings measure with a Gini coefficient of 0.608. The decrease is not larger because, while the South African labour market does display a substantial amount of churning, this churning is concentrated amongst unskilled and low wage earners who fluctuate between unemployment and low-earnings employment. In contrast, well paid and highly skilled individuals tend to have much greater levels of job security, which mitigates the potential differences between the two measures.

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Finn, Arden, and Vimal Ranchhod. "Short-run differences between static and dynamic measures of earnings inequality in South Africa." Research Project on Employment, Income Distribution and Inclusive Growth , no. 35 (2017).
Copyright DataFirst, University of Cape Town