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Does training benefit those who do not get any? Elasticities of complementarity and factor price in South Africa

By Alberto Behar

Abstract

Commentators claim a shortage of skills, particularly artisanal labour, in South Africa is constraining output and that a rise in skill supply would benefit less skilled occupations. This assumes/implies skilled and unskilled labour are q-complements. This paper estimates Hicks Elasticities of Complementarity and elasticities of factor price. Aggregate estimates suggest more skilled (white collar) labour complements less skilled (blue collar) labour, so a rise in skill supply would lead to a rise in demand for less skilled labour. Disaggregated results show skilled/artisanal and unskilled labour are complements while semi-skilled and unskilled labour are substitutes. These results allow for imperfectly elastic product demand, rigid wages, inference on highly non-linear elasticities and a variety of estimation approaches.

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