Globalisation and inequality in South Africa: modelling the labour market transmission

This paper draws on a Computable General Equilibrium (CGE) model to evaluate the extent and causes of income inequality in South Africa after 1994. In doing so the paper extends the CGE-modelling approach in South Africa by incorporating dynamics into the comparative static CGE model used by the Industrial Development Corporation of South Africa. The 1995 Social Accounting Matrix for South Africa prepared by DRI-WEFA SA (Pty) Ltd. (now Global Insight Southern Africa) is used as database. The results from the paper is consistent with evidence from recent household and firm-level surveys in South Africa and supports labour market reform coupled with social security as instruments to achieve more equitable outcomes from globalisation.