Population aging, unemployment and house prices in South Africa

Abstract: This paper examines the joint dynamics between house prices, population aging and unemployment in South Africa. It uses provincial level dataset to compare the demographic effects of house prices across different housing segments over the period from 1995 to 2015. When heterogeneity, endogeneity and spatial effects are controlled for, the analysis finds that on average in the past 22 years, population aging have contributed to the decline of the South African house prices by 6.28 and 7.52 basis point in the large and medium housing segments, respectively while the small segment has remained unaffected. Likewise, unemployment appears to have played a significant role in slowing down the growth rate of house prices across segments but to a lesser extent. While the response of real house prices to demographic shift is consistent with the life cycle hypothesis, the insensitivity of small house prices to aging might reveal the mitigating effect of the retirees’ relocation from larger segment houses to smaller ones. The relocation effect might induce higher demand of small segment houses which drives up their prices and offsets the detrimental effect of aging. These findings suggest that, increasing the incentive to prolong the retirement age or engage elderly population in other income generating activities to meet their increasing financial needs given the meagre social security system, is likely to sustain the growth prospective of housing value in South Africa

Corruption's effect on BRICS countries' economic growth: a panel data analysis

Purpose: The theoretical debate of corruption's impact on economic growth remains unsettled, making it an empirical question. This study aims to investigate corruption's effect on BRICS countries' economic growth. Design/methodology/approach: A panel dataset on BRICS countries spanning 1996 to 2020 was used. Bias-corrected estimators in small dynamic panels were employed to estimate a growth model as a linear-quadratic function of corruption that accounts for cross-sectional dependence, endogeneity and unobserved heterogeneity due to country and time-specific characteristics. Findings: The results indicate that corruption is detrimental to economic growth in BRICS countries; the quadratic relationship implies corruption is less prevalent in some countries than others. Thus, governments of BRICS countries are encouraged to embark on anti-corruption policies to boost their economic performance. Originality/value: An important limitation of corruption studies is the difficulty in measuring real corruption experiences due to the secretive nature of corruption and the fact that corruption is known not to leave a paper trail. For the uncertainty of the index estimates, the analysis used a continuous corruption composite score measuring the standard deviation of the extent to which public power is exercised for public gain. Furthermore, estimation and inference are robust to small dynamic panels with a general form of cross-sectional dependence

House prices and fertility in South Africa: A spatial econometric analysis

In this paper, the effect of house prices on fertility is analysed across South African provinces using spatial Durbin model. This approach assumes spatial linkages through both endogenous and exogenous variables while allowing the total housing effect on fertility to be decomposed into direct and indirect effects. Empirical results using provincial annual data from 1998 to 2015 indicate that housing market plays an important role in the fertility decision besides female job participation and labour market condition. Particularly, an increase in regional house prices results in a decrease in local and subsequently national fertility rate. However, the spillover effect to adjacent provinces appears to be positive and significant, except in the small housing segment; suggesting that an increase in regional house prices will spur fertility in other regions. Intuitively, house price inflation in a province makes housing relatively affordable in adjacent regions; housing affordability being an important driver of fertility. Alternatively, this positive effect might also capture the income effect felt by homeowners following a rise in house prices, which might in turn be favourable to fertility due to financial edge. The insignificant indirect effect from the small housing segment might reflect the fact that small houses are less likely to be the family residential choice. These findings confirm the importance of spatiotemporal economic behavior in shaping regional fertility in South Africa

The role of financial conditions in transmitting external shocks onto South Africa

Abstract: This paper analyses the spillover effects of external financial conditions onto South Africa using quarterly domestic and international data from 1996Q1 to 2014Q4. First, principal component analysis and vector autoregressive model are utilized to build financial conditions indices for South Africa and its main trading partners, namely, China, Germany, the United States, Japan, the United King, Netherlands, Italy, France and Belgium. Consistently across both methodologies, the financial conditions indices obtained track each other fairly well and capture the 2008/09 global financial crisis. Second, a Global Vector Autoregressive model comprised of financial indices and other macroeconomic variables is implemented to assess how international financial shocks spillover into South Africa. Our findings show that a sudden tightening of the US financial conditions has a significant but short lived effect on the South Africa’s real GDP growth while the spillover effects from other trading partners appear to be of negligible impact throughout the sample period

Effect of marine protected areas and macroeconomic environment on meat consumption in SEAFO countries

Abstract: Livestock production and consumption of meat are significant contributors to today’s most serious environmental problems and global warming. This paper investigates the role of marine reserves in shaping meat consumption pattern across member countries of the South East Atlantic Fisheries Organisation (SEAFO) for the period 1990 to 2009. Using a panel data including economic factors, life expectancy and environmental awareness, we find that meat consumption is positively associated with the presence of marine protected areas (MPAs). This suggests a possible increase in substitution of meat eating to seafood by SEAFO member countries due to aquatic resources conservation. Marine resource conservation policy is not a complementary strategy for sustainable livestock policy. This points out to some necessary policy improvements and actions to ameliorate the relationship between MPA and the negative environmental impacts of livestock. Furthermore, economic factors appear to have played a significant role in explaining meat consumption growth. Apart from price inflation, the most relevant factors that positively influence meat consumption appear to be GDP, exports and imports of agricultural products, and urbanisation. Beyond economic factors, negative health information associated with meat consumption appear to lead to a reduction in the consumed quantities of meat. There is evidence that meat-eating behaviour is not only related to macroeconomic development but also to environmental awareness

The dynamic relationship between house prices and output: evidence from US metropolitan areas

This paper investigates the long-run and short-term dynamics of 351 US metropolitan statistical area housing prices in relation to personal income. We apply a panel cointegration approach on annual data from 1993 to 2011 and find a long-run relationship between local house prices and per capita personal income. The causal direction is then assessed based on an autoregressive distributed lag specification that also accommodates for error-correction. Results from Granger-causality tests reveal the existence of a bi-directional causality between real house prices and real per capita personal income over both long and short-horizons. Our results continue to be robust, when our bivariate system is extended to include additional MSA-level (employment and population) and national-level variables (real stock price and mortgage interest rate). We conclude that changes in personal income can predict house price movements and vice versa

Corruption's effect on BRICS countries' economic growth: a panel data analysis

Purpose: The theoretical debate of corruption's impact on economic growth remains unsettled, making it an empirical question. This study aims to investigate corruption's effect on BRICS countries' economic growth. Design/methodology/approach: A panel dataset on BRICS countries spanning 1996 to 2020 was used. Bias-corrected estimators in small dynamic panels were employed to estimate a growth model as a linear-quadratic function of corruption that accounts for cross-sectional dependence, endogeneity and unobserved heterogeneity due to country and time-specific characteristics. Findings: The results indicate that corruption is detrimental to economic growth in BRICS countries; the quadratic relationship implies corruption is less prevalent in some countries than others. Thus, governments of BRICS countries are encouraged to embark on anti-corruption policies to boost their economic performance. Originality/value: An important limitation of corruption studies is the difficulty in measuring real corruption experiences due to the secretive nature of corruption and the fact that corruption is known not to leave a paper trail. For the uncertainty of the index estimates, the analysis used a continuous corruption composite score measuring the standard deviation of the extent to which public power is exercised for public gain. Furthermore, estimation and inference are robust to small dynamic panels with a general form of cross-sectional dependence

House prices and fertility in South Africa: A spatial econometric analysis

In this paper, the effect of house prices on fertility is analysed across South African provinces using spatial Durbin model. This approach assumes spatial linkages through both endogenous and exogenous variables while allowing the total housing effect on fertility to be decomposed into direct and indirect effects. Empirical results using provincial annual data from 1998 to 2015 indicate that housing market plays an important role in the fertility decision besides female job participation and labour market condition. Particularly, an increase in regional house prices results in a decrease in local and subsequently national fertility rate. However, the spillover effect to adjacent provinces appears to be positive and significant, except in the small housing segment; suggesting that an increase in regional house prices will spur fertility in other regions. Intuitively, house price inflation in a province makes housing relatively affordable in adjacent regions; housing affordability being an important driver of fertility. Alternatively, this positive effect might also capture the income effect felt by homeowners following a rise in house prices, which might in turn be favourable to fertility due to financial edge. The insignificant indirect effect from the small housing segment might reflect the fact that small houses are less likely to be the family residential choice. These findings confirm the importance of spatiotemporal economic behavior in shaping regional fertility in South Africa