The Economic Impacts of Government Financing of the 2010 FIFA World Cup

This paper presents estimates of the economic impacts of financing the hosting of the 2010 FIFA World Cup by the government of South Africa. Ex ante analysis using a fiscal social accounting matrix model indicates that hosting of the event impacts positively on gross domestic product and imports. The positive impact on imports will, inter alia, lead to deterioration in the current account deficit for a given amount of exports. Owners of capital benefit more than owners of labour as a result of 2010 FIFA World Cup expenditures by the government. Middle-income Black households are the largest winners, followed by high-income Whites. Asians experience the least gain. These outcomes are explained by the initial factor endowments and their sectoral allocation in the social accounting matrix. Government revenue goes up in response to the demand injection, and a large proportion of it accrues to central government and local government respectively.2010 FIFA World Cup, Economic Impact, SAM Modelling, Legacy, South Africa

South Africa Trade Liberalization and Poverty in a Dynamic Microsimulation CGE Model

South Africa has undergone significant trade liberalization since the end of apartheid. Average protection has fallen while openness has increased. However, economic growth has been insufficient to make inroads into the high unemployment levels. Poverty levels have also risen. The country’s experience presents an interesting challenge for many economists that argue that trade liberalization is pro-poor and pro-growth. This study investigates the short and long term effects of trade liberalization using a dynamic microsimulation computable general equilibrium approach. Trade liberalization has been simulated by a complete removal of all tariffs on imported goods and services, and by a combination of tariff removal and an increase of total factor productivity. The main findings are that a complete tariff removal on imports has negative welfare and poverty reduction impacts in the short run which turns positive in the long term due to the accumulation effects. When the tariff removal simulation is combined with an increase of total factor productivity, the short and long run effects are both positive in terms of welfare and poverty reduction. The mining sector (highest export orientation) is the biggest winner from the reforms while the textiles sector (highest initial tariff rate) is the biggest loser. African and Colored households gain the most in terms of welfare and numbers being pulled out of absolute poverty by trade liberalization.Sequential dynamic CGE, microsimulation, trade liberalization, total factor productivity, poverty, welfare, growth, South Africa

ACCOUNTING FOR FOREST RESOURCES IN ZIMBABWE

Resource /Energy Economics and Policy,

The General Equilibrium Effects of a Productivity Increase on the Economy and Gender in South Africa

This study utilises a computable general equilibrium (CGE) model to examine the effects of economy-wide (SIM 1) and partial (SIM 2) productivity increases on the economy, gender employment, wages, income and welfare in South Africa. The model has 49 sectors, 14 household categories, and 2 primary inputs. SIM 1 results in ‘output’ led employment demand and increased earnings for all skill types of men and women. Skilled men benefits more than others in most sectors. Under SIM 2, productivity has negative employment impact of all skills mostly in labour-intensive sectors. Some displaced labour relocates to expanded export-orientation and service sectors resulting in increased economy-wide jobs and earnings. Unskilled women earnings, however, decline because they are concentrated in low-paying positions. In addition, productivity improves household’s welfare due to reduced commodity prices and improved earnings.CGE, FDI, South Africa, Gender, Productivity

Poverty and Inequality Impacts of Trade Policy Reforms in South Africa

South Africa has undergone significant trade liberalization since the end of apartheid. Average protection has fallen while openness has increased. However, economic growth has been insufficient to make inroads into the high unemployment levels. Poverty levels have also risen. The country's experience presents an interesting challenge for many economists that argue that trade liberalization is pro-poor and pro-growth. This study investigates the short and long term effects of trade liberalization using a dynamic microsimulation computable general equilibrium approach. Trade liberalization has been simulated by a complete removal of all tariffs on imported goods and services, and by a combination of tariff removal and an increase of total factor productivity. The main findings are that a complete tariff removal on imports has negative welfare and poverty reduction impacts in the short run which turns positive in the long term due to the accumulation effects. When the tariff removal simulation is combined with an increase of total factor productivity, the short and long run effects are both positive in terms of welfare and poverty reduction. The mining sector (highest export orientation) is the biggest winner from the reforms while the textiles sector (highest initial tariff rate) is the biggest loser. African and Colored households gain the most in terms of welfare and numbers being pulled out of absolute poverty by trade liberalization.Sequential dynamic CGE, microsimulation, trade liberalization, total factor productivity, poverty, welfare, growth, South Africa

Poverty and inequality effects of a high growth scenario in South Africa: A dynamic microsimulation CGE analysis

The debate about the consequences of economic growth on poverty and welfare was recently rekindled in South Africa by announcements that the government would be targeting a sustainable growth rate of 6 percent per annum under the Accelerated and Shared Growth Initiative for South Africa (ASGISA). This paper uses a sequential dynamic computable general equilibrium model linked to a nationally representative household survey to assess the poverty and economic consequences of a higher economic growth scenario. The main findings are that higher economic growth induces reductions in poverty both in the short and long run. It enhances capital accumulation, particularly in the agriculture and textiles sectors. An interesting observation is that the Mining industry benefits the least from a high economic growth scenario. However, this is not related to domestic savings/investment. Mining is strongly dependent on foreign investments and the industry return to capital is less profitable to domestic institutions, particularly households and this is what explains the lower benefits to the sector. African and Coloured households reap most of the benefits, with greater gains among urban unskilled dwellers. These findings suggest that lifting of growth constraints rather than macroeconomic stimulation would induce higher growth with the resulting beneficial effects. Economic growth of the levels simulated does not appear to be inconsistent with macroeconomic balance, as reflected in price stability, balance of payments and sectoral effects.Sequential dynamic CGE, microsimulation, ASGISA, poverty, welfare, growth, South Africa

A multiregion general equilibrium analysis of fiscal consolidation in South Africa:

A multiregion applied general equilibrium model is used to examine the financial interactions among spheres of government in the context of fiscal consolidation. The framework combines nine regional submodels interacting through the trading of goods and services and the mobility of labor and capital. The model integrates intergovernmental fiscal transfers, which play an important role in reducing the disparity in living standards between regions. The analysis demonstrates that the current intergovernmental revenue transfer system has significant inter- and intraregional equity effects, although its nationwide impact is less important. Reducing intergovernmental transfers leads to a reduction in welfare in the four regions where the net transfers were initially positive (Limpopo, Eastern Cape, KwaZulu-Natal, and North West Province). In contrast, welfare increases in the five other regions (Northern Cape, Mpumalanga, Free State, Gauteng, and the Western Cape). When transfer revenues fall and, consequently, regional and local government revenues drop, poor households are the most affected, as they depend more on public services that are essentially financed by governments. When the government's fiscal position improves, it is also poor households that benefit more from additional government expenses.intergovernmental transfer, multiregion applied general equilibrium, consolidation, welfare,

Does Trade Liberalisation Lead to Poverty Alleviation? a CGE Microsimulation Approach for Zimbabwe

A CGE microsimulation model is used to study the poverty impacts of trade liberalization in Zimbabwe. A sample of 14006 households from a 1995 household survey is individually modeled in a CGE framework. The experiment performed is a 50 percent reduction in all import tariffs. The sectors with the highest initial tariffs are the non-export agriculture sectors and the most export-intensive sectors are found in agriculture and in mining. The halving of tariffs favors export-oriented sectors, mainly in agriculture, whereas industrial sectors are hardest hit by the increased import competition. As agriculture is intensive in unskilled labor and industry is intensive in skilled labor, unskilled wages rise relative to skilled wages. The consumer prices fall and this, together with increased unskilled wages, leads to a fall in poverty. The fall in the price of manufactured food, which is consumed mainly in urban areas, coupled with the large number of unskilled workers in these urban areas, explains why poverty falls more here than in rural Zimbabwe.Computable General Equilibrium, Trade Liberalisation, Microsimulation, Poverty

Analysing Alternative Policy Response to High Oil Prices, Using an Energy Integrated CGE Microsimulation Approach for South Africa

An energy-focused integrated CGE microsimulation approach is used to assess the implications of differential government policy responses in South Africa, to increases in international oil prices. The first scenario assumes that increases in world oil and petroleum products are passed through to end users with no changes in government tax/subsidy instruments. The second scenario assumes that the world price increases are nullified by a full price subsidy by government in one scenario, while, in the third scenario, revenues generated from a 50 percent tax on the windfall profit of the synthetic petroleum industry, help to minimize the loss in government revenue. Overall output falls by between 2.2 and 2.5 percent, while the government deficit varies from a worsening of 12 to 22 percent under the three scenarios. Synthetic petroleum, coal, and electricity benefit under the floating price scenario, while none expands its output when a 50 percent tax is levied on the profit of the synthetic petroleum industry. Unemployment increases among medium and low-skilled workers, while skilled workers witness a substantial fall in their remuneration, particularly in rural areas. In both rural and urban areas, women are adversely affected relative to men. The poverty headcount ratio and inequality increase slightly more in the price-setting scenarios relative to the floating-price scenario. Thus, allowing the prices to be passed through to end users probably has a less adverse impact at a macroeconomic level, although there may be adverse distributional consequences.