Abstract:

South Africa is well-known for its extremely high unemployment rate. A favoured explanation is SA’s very low rate of employment in the informal sector. Using cross-country data, we start with an accounting exercise which confirms that informal employment is comparatively very low in South Africa, and also that formal employment is surprisingly high for an economy of SA’s size. So, what explains the lack of informal employment, particularly in the informal sector? Existing research has focused on barriers to informal sector employment in urban areas, which we show are important. However, we also reanalyse self-employed agricultural work (SEAW) in various South African household surveys, and show that a very large part of “missing” informal sector employment in SA comes from an abnormally low rate of SEAW. We hypothesize that the low rate of SEAW is linked to South Africa’s history of land dispossession, and estimate a structural model which integrates land dispossession and barriers to urban informal enterprise into a model of structural transformation. Fitting the model to cross-country data, we find that these two factors work very well together to explain South Africa’s unusual labour force structure. 

About the presenter: 

Ihsaan Bassier is a lecturer (Assistant Professor) in Economics at the University of Surrey. His work follows a research agenda on firm wage-setting power in the fields of labour and development, mostly using administrative data. This includes estimating labour supply elasticities, collective bargaining spillovers, and the interaction between monopsony power with structural development. He is affiliated to the Centre for Economic Performance at the LSE, and SALDRU at the University of Cape Town.