What drives economic inequality?

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Economic growth and development, particularly as a means to alleviate poverty, overcome the huge disparities in income levels and create jobs.

Wealth gap. (Reuters)

This is the focus of two Research Chairs supported by the South African Research Chairs Initiative. 

Professor Haroon Bhorat at the University of Cape Town has dedicated his research since 2008 to looking into econometric models that try to create a greater understanding of the country’s growth path, particularly as it relates to the reducing income inequality.

This work has examined the areas of labour economics, poverty and income distribution through the scientific assessment of the economy’s growth path as well as the impact of minimum wages and other policy instruments such as social grants.

He says there have been two primary research outputs, the first being the categorisation of the country’s growth path for which he has employed the growth incidence technique -— a scientific assessment of economic growth.

The second area is in using cutting-edge methodologies to investigate the impact of minimum wages on income inequality.

The output from these explorations is used to influence policy, in which Bhorat has had a front-row seat as an advisor to former finance minister Pravin Gordhan. 

He says the big challenge is to identify innovative solutions that remain sensitive to labour union concerns. 

“It’s about finding micro policy solutions that make an impact,” he says.

Professor Dorrit Posel at the University of KwaZulu-Natal is an economist specialising in applied micro-economic research, and has been exploring the interface between households and labour markets. 

Her Research Chair has been used to gain a greater understanding of these issues, with considerable work done on the economic effects of marriage — particularly in African cultures.

She explains that low marriage rates have significant implications for the nature of family formation, which have contributed to a disproportionate number of single-parent households. 

Her investigations have considered the impact from the custom of paying ilobola, which is widely observed, although considered to  raise the costs of marriage considerably. 

Although this work occupies a large portion of Posel’s research work, she is also looking into the temporary nature of labour migration, the measure of unemployment, the earnings premium to English language proficiency, and relations of trust, levels of happiness and perceptions of poverty among South African men and women.

Posel is using the opportunities afforded by the Chair to strengthen quantitative research skills among postgraduate students studying development and to foster inter-institutional collaboration.

This supplement has been paid for by Department of Science and Technology and its contents signed off by the DST and the National Research Foundation.

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