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Type Working Paper - Economic Research Southern Africa Working Paper
Title The persistence of apartheid regional wage disparities in South Africa
Issue 816
Publication (Day/Month/Year) 2020
Despite the ending of apartheid, regional wage disparities remain prevalent in South Africa with the former homelands characterised by persistently low wages and incomes. In this paper, we use a new economic geography (NEG) model to estimate the extent to which the persistence in apartheid regional wage disparities are an outcome of economic forces such as access to markets. We estimate a structural wage equation derived directly from the NEG theory for 354 regions over the period 1996 to 2011: We Önd support for the NEG model in explaining regional wage disparities across regions in South Africa, although the market access e§ects are highly localised in view of high distance coe¢ cients. We also Önd a wage deÖcit in homeland areas even after controlling for NEG and other region-speciÖc characteristics. Average wages of workers in homeland areas were 11.8% lower than predicted in 1996, with this gap rising to 13.3% in 2011. This gap remains using alternative estimation approaches and the inclusion of controls for infrastructure, removal of incentives under the deconcentration policies and local amenities

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