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Citation Information

Type Working Paper - WIDER Working Paper
Title Youth unemployment hysteresis in South Africa: macro-micro analysis
Issue 20
Publication (Day/Month/Year) 2021
URL https://sa-tied.wider.unu.edu/sites/default/files/SA-TIED-WP159_0.pdf
This study simulates the macro-micro economic impacts of the employment policy, focusing on hysteresis in youth unemployment in South Africa. Specifically, we apply a dynamic computable general equilibrium model to calibrate the 2015 South African Social Accounting Matrix to estimate, compare, and determine the impact of employment policy on youth unemployment as well as on aggregate economic outcomes. We simulate two scenarios where we reduce the import price of fuel by 20 per cent. Then, the total government savings from the reduced transport subsidy are reallocated to the education sector to support the unemployed youth. The research findings indicate that demand for youth labour increases in the long run, resulting in a decline in the unemployment rate. Moreover, the consumer price index decreased more than nominal income, thereby increasing household purchasing power and, potentially, easing poverty.

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