The Employment Effects of Different Trade Regimes in South Africa

Holden, Merle; Holden, Paul

doi:10.1111/j.1813-6982.1981.tb00708.x

Cited by 7 publications

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“…As South Africa has integrated itself into the world economy, so concerns about the impact on employment, production and growth are being raised. Currently the trade-employment debate is most prominent (Bell & Cattaneo, 1997;Nattrass, 1998;Bhorat, 1999;Edwards, 1999Edwards, , 2001 and is an extension of the debate of Holden & Holden (1981), Van Seventer (1988) and Holden & Holden (1989) during the 1980s. Research on the relationship between trade regimes, trade ows and production is less prominent and is dominated by a number of World Bank publications (Belli et al, 1993;Fallon & Pereira de Silva, 1994;Tsikata, 1999).…”

Section: Introductionmentioning

confidence: 97%

Trade and the structure of South African production, 1984-97

Edwards¹

2001

Development Southern Africa

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With the onset of trade liberalisation, fears have been raised concerning the impact of trade on manufacturing output, employment and growth. Using an input-output methodology, this article decomposes South African output growth between 1984 and 1997 into final demand expansion, trade flows and technology. There are two main findings. First, trade liberalisation has not deindustrialised the manufacturing sector. Although import penetration has risen, export growth has matched and exceeded the potential import-induced losses in domestic production. South Africa's response thus conforms closely to international evidence. Secondly, a combination of strong growth in capital-intensive exports and import penetration in ultra-labour-intensive sectors has aided the structural shift in production towards capital-intensive sectors. However, capital-biased supply-side policies, as well as endemic problems within ultra-labour-intensive sectors, suggest that domestic factors and not trade liberalisation lie behind this shift.

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Section: Introductionmentioning

confidence: 97%

Trade and the structure of South African production, 1984-97

Edwards¹

2001

Development Southern Africa

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“…Assume that the economy can be described as producing two goods, exportables (E) and importables (M), with two factors of production labour (L) and capital (K). Exportables are assumed to be labour intensive while importables are assumed to be capital intensive (Holden and Holden, 1981). With given endowments of capital and labour the production possibilities of the economy are described by the production possibility curve TT1 (Fig.…”

Section: The Basic Modelmentioning

confidence: 99%

Unemployment in a Sector Specific Trade Model in the Presence of Economic Sanctions

Holden

1989

South African J Economics

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THE DISCUSSION of the economic effects of sanctions on South Africa has focused on the long run adjustment of the economy and on the welfare losses incurred. The modelling of unemployment as a result of sanctions has been limited to general statements as to the role of deficient demand, factor market distortions and limited factor substitution (Cooper and Black, 1987). This paper provides a formal, albeit limited, explanation for unemployment within a trade model. Specifically it proposes that unemployment can be generated within a two sector, two factor model with capital specificity and downward rigidity of real wages. The distinction is made between short, medium and long run adjustment of the economy to the external shock of sanctions, and consideration is given to the distributional implications for the factors of production in South Africa. The Basic ModelAssume that the economy can be described as producing two goods, exportables (E) and importables (M), with two factors of production labour (L) and capital (K). Exportables are assumed to be labour intensive while importables are assumed to be capital intensive (Holden and Holden, 1981). With given endowments of capital and labour the production possibilities of the economy are described by the production possibility curve TT1 (Fig. 1). Community indifference curves show the set of preferences for exportables and importables. Before sanctions are imposed the economy is producing at A and consuming at B. In general, economic sanctions against countries have not been comprehensive and this has also been the case for South Africa. It is well known that sanctions are porous. This means that exporters have had to find other markets, or have used middlemen to launder their goods, in both instances receiving a lower net price. The lower price of exportables will, over the longer term, move the economy to producing at C and consuming at D at a level of welfare represented by CIC0. The change in the terms of trade does not imply a state of autarky for the economy. Trade still occurs albeit at a reduced level for both exports and imports. At C, as at A, there is still full employment of the factors of production. This raises the 1989 SAJE v57 (2) p138 question of how unemployment arises in this model. The traditional Heckscher-Ohlin model cannot answer this question because it assumes full mobility of homogeneous factors of production and flexible factor prices. However, if it is assumed that in the short and medium run capital is specific to each sector, such that Ke and Km are the initial values of capital in exportables Fig. 1 Production possibilities and consumer preferences. and importables, and that wages are downwardly inflexible, unemployment in .the exportable sector can be generated. The specific factors model of Jones (1971) has a factor that is wholly specific to each sector. This factor can be interpreted as capital which is completely fixed in the production of exportables and importables as shown in the Edgeworth-Bowley Box for the economy (Fig. 2 up...

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International competition and industrial decentralization in South Africa

Bell

1987

World Development

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The Employment Effects of Different Trade Regimes in South Africa

Cited by 7 publications

References 0 publications

Trade and the structure of South African production, 1984-97

Trade and the structure of South African production, 1984-97

Unemployment in a Sector Specific Trade Model in the Presence of Economic Sanctions

International competition and industrial decentralization in South Africa

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