economic and development problems in south africa and africa poverty and inequality in sa

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Department of Economics Faculty of Economic and Management Sciences Economic and Development Problems in South Africa and Africa Poverty and Inequality in SA

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Economic and Development Problems in South Africa and Africa Poverty and Inequality in SA. Reviews. Case study – brief discussion Democracy is consolidated when the first elected government gives up power after losing an election. Is SA a democracy? - PowerPoint PPT Presentation

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Page 1: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

Department of Economics

Faculty of Economic and Management Sciences

Economic and Development Problems in South Africa and Africa

Poverty and Inequality in SA

Page 2: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Reviews• Case study – brief discussion

• Democracy is consolidated when the first elected government gives up power after losing an election. Is SA a democracy?

• Democracy as a way to choose leaders or as a means to improving material outcomes? The same thing?

• Why did ANC change their tune when they came to power?

• Van der Berg (2010) article• Not all information is of equal value

(!)

Page 3: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Absolute vs Relative poverty Measuring Poverty – FGT

+ understand complexities Lorenz curves Gini coefficient Understand the nature of

poverty/inequality in SA General knowledge of developing

countries (TED

video)

Aims for these lectures…

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PovertyWhat is poverty?• “Poverty is the inability of an individual

or a family to command sufficient resources to satisfy basic needs” (Fields Ch4)

Money-metric or multi-dimensional framework?• We are looking at money-metric, but MDF in

brief: • Income and expenditure justified as poverty measure

partly because of presumed correlation with well-being and empowerment.

• Important to understand that money is not end in itself, but means to an end

• $ correlated with food, shelter, nutrition etc but not well correlated with access to public services, safety, human rights etc

• Amartya Sen = Godfather

Page 5: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty• Focus axiom: The only thing we need to know

about the non-poor are how many there are (poverty not inequality!).• Tony Blair was “intensely relaxed” about the millions

earned by David Beckham (a footballer) provided that child poverty fell.

• Absolute vs Relative measure of poverty?• $1/day or 30% mean income?

Page 6: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Assignment 3

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 170

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PovertyMeasuring poverty?

• Why do we need to measure it?• How do we measure it?

• Foster Greer Thorbecke (FGT)• Poverty Headcount ratio (α = 0)• Poverty Gap ratio (α = 1)• Poverty Severity ratio (α = 2)

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If poverty line was at $10, what is P0 ?

Poverty

Page 9: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty

P1 ? P2 ? Person A?

What would a more ‘severe’

distribution look like?

Page 10: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty

Coudouel, Hentschel & Wodon

Page 11: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty - SA

• (Leibbrandt et al, 2010)

Page 12: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty-SA

• (Leibbrandt et al, 2010)

Page 13: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty - SA

The average poor South African is a 1) young 2) black 3) girl with 4) little education, 5) living in a large, 6) female-headed, 7) rural household which has 8) low-education 9) no employment and 10) has been affected by AIDS.

Page 14: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty - SA• Impact of social grants on poverty?• Labour market – focus for solving

inequality? (SVDB).brief explanation of Human Capital Model

Page 15: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty - SA• Impact of social grants on poverty?• Labour market – focus for solving

inequality? (SVDB)

“Wage inequality, deeply rooted in South Africa’s history, plays a central role in overall income distribution, and patterns of human capital development are fundamental to the future growth path and therefore to poverty and income distribution. The paper therefore concludes that reducing inequality substantially is currently unlikely without a massive increase in the human capital of those presently poor, but that prospects in this regard are inauspicious” (Van der Berg, 2010)

Page 16: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty SA

• Has poverty in SA declined?• It depends who you ask• Survey method vs National accounts• Which poverty line?• Which distribution?

Page 17: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty measurement - sidebar

1981 1984 1987 1990 1993 1996 1999 2002 20050

5

10

15

20

25

30

35

40

45

Global Poverty Comparison%

wor

ld p

opul

atio

n be

low

$1

(200

5 do

llars

)

Page 18: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty - SA

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Poverty – SA, the gist• Poverty has not gone up since the

transition• Differing views on when and how much

it came down• Depends which surveys you use, also

which method (Survey-method or national accounts anchoring)

• Common-sense methods are helpful• Hunger decreased

Back to Beckham…

Page 20: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Inequality

Page 21: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Inequality• Calculating the Gini coeficient• Gini = (Blue) / (Red) • Total equality? Total inequality?

Page 22: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Inequality

• (Leibbrandt et al, 2010)

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Page 24: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty and Inequality

(Coudouel, Hentschel & Wodon)

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Inequality - SA

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Inequality - SA

<Within-race inequality has grown (especially amongst Africans)

Between-race inequality has declined

• African population important!!

Page 27: Economic and Development  Problems in South Africa and Africa Poverty and Inequality in SA

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Poverty & Inequality - questions • Poverty

• Measurement issues – how to move forward?

• How to reduce poverty? • Economic growth? / Trade? • Social transfers? • Education?

• Inequality• Is inequality a ‘national’ poverty?• Implications for

social/economic/political stability?

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Admin• In the week after the holidays

• Tues 10 April – 8AM lecture only (i.e. No 10AM lecture)

• Wednesday 12 April – 12:00 lecture (i.e. Normal)• 1 page outline of essay due 10 April(!) NOT the

following week as in the old course outline.• Both sessions will be on education – I

will let you know if there are readings for this week.