This paper investigates cross-sectoral productivity differentials in South African industry and their distributional consequences. The analysis shows that typically, traded sectors have experienced low productivity growth over the past decade, while skill intensive service sectors have had significant productivity growth. This is the inverse of the traditional Balassa-Samuelson sectoral transformation hypothesis, where high wages in high-productivity traded sectors increase wages throughout the economy, thus increasing prices on non-traded goods and revaluing the country's real exchange rate. Instead, the higher productivity of non-traded sectors experienced in South Africa induces a devaluation of the real exchange rate and a contraction of the traded sectors. The results of the estimation show evidence of this "inverse" Balassa-Samuelson effect for agriculture and manufacturing and in particular mining. This "inverse" Balassa-Samuelson effect has important distributional consequences: the high-productivity sectors are associated with cheaper goods and services for wealthy households. This in turn burdens poor households, which are more dependent on traded goods, with higher prices, which are a consequence of low productivity and high markups.
Detalhes
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Autor
Dadam,Vincent, Hanusch,Marek, Viegi,Nicola
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Data do documento
2019/07/22
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TIpo de documento
Documento de trabalho sobre pesquisa de políticas
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No. do relatório
WPS8942
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Nº do volume
1
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Total Volume(s)
1
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País
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Região
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Data de divulgação
2019/07/22
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Disclosure Status
Disclosed
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Nome do documento
Why South Africa Is Cheap for the Rich and Expensive for the Poor : Reconsidering the Balassa-Samuelson Effect
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Palavras-chave
traded sector; real exchange rate; trade and investment; relative price; poor household; law of one price; living condition; barrier to entry; traded goods; productivity growth; productivity dynamic; international market; high levels of protection; access to international market; Primary and Secondary Education; real exchange rate depreciation; downward rigidity of wage; general level of price; real exchange rate dynamic; relative per capita income; household expenditure and income; cost of entry; manufacturing sector; increase in prices; weight of item; basket of good; increase in labor; distribution of skill
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