A History With Evidence: Income inequality in the Dutch Cape Colony

The arrival of European settlers at the Cape in 1652 marked the beginning of what would seemingly become an extremely unequal society, with ramifications into modern-day South Africa. In this paper, we measure the income inequality at three different points over the first century of Dutch rule at the Cape. What emerges from the study is a society characterised by severe inequality, with a relatively (and increasingly) poor farming population combined with pockets of wealth. The inequality is driven largely by wheat and, especially, wine production, which gave rise to an elite. Historical evidence supports our findings: Amongst others, the imposition of sumptuary laws in 1755 is closely correlated with a more segmented elite which includes both alcohol merchants and (wine) farmers. We compare these measures to those of other regions and time-periods in history. Although the exact level of inequality is determined to a large extent by our assumptions, the Cape Colony registers one of the highest Gini-coefficients in pre-industrial societies. This provides some support to verify the Engerman-Sokoloff hypothesis that initial levels of high inequality would give rise to growth-debilitating institutions, resulting in higher inequality and underdevelopment.

Determining the Causes of the Rising South African Unemployment Rate: An Age, Period and Generational Analysis

This paper takes advantage of the wealth of cross-sectional household surveys conducted after South Africa’s political transition, in order to gain insights into the causes of the acceleration in the already high unemployment rate. A synthetic panel dataset is constructed to decompose unemployment and other labour market outcomes into cyclical, generational and life-cycle effects. This dynamic view isolates which groups are at risk across the period and allows a more nuanced understanding of the long-run and short-run impacts. Our results indicate that the higher unemployment rates faced by the young are predominantly due to the disadvantage of entering the labour market more recently, rather than being attributable to their age. We furthermore isolate what has driven this long-run increase in labour market participation. In particular, higher educational attainment and household formation decisions across generations fuel labour supply among the more recent entrants. We find some correspondence between the cyclical variation in unemployment and the business cycle. This suggests that jobless growth is not a relevant feature of the South African labour market. This paper confirms many of the causes of unemployment that are postulated in the literature. The dynamic nature of this study has furthermore allowed the separation of short-run and long-run aspects of unemployment. The decomposition approach adopted here has uncovered the linkages between the schooling system and the labour market across all generations, but, in particular, has isolated why the youngest generations have exhibited such distinct risks. The surge in labour supply amongst most recent generations (those aged 20 in 1995) can be explained by rapid exit rates from the education system resulting from over-age enrolment policies enacted in the post-apartheid period. This has pushed individuals into the labour market prematurely and without the adequate skills to be absorbed into the workplace. The importance of the generational aspects of unemployment relative to life cycle and business cycle impacts suggests that policies should address the structural issues affecting each of these birth cohorts, rather than focussing on age groups per se.Unemployment, Participation, Feminisation of Labour Force, Education Policy, Birth Cohort Panels, Age-Period-Cohort Decompositions

Determining the Causes of the Rising South African Unemployment Rate: An Age, Period and Generational Analysis

This paper takes advantage of the wealth of cross-sectional household surveys conducted after South Africa’s political transition, in order to gain insights into the causes of the acceleration in the already high unemployment rate. A synthetic panel dataset is constructed to decompose unemployment and other labour market outcomes into cyclical, generational and life-cycle effects. This dynamic view isolates which groups are at risk across the period and allows a more nuanced understanding of the longrun and shortrun impacts. Our results indicate that the higher unemployment rates faced by the young are predominantly due to the disadvantage of entering the labour market more recently, rather than being attributable to their age. We furthermore isolate what has driven this longrun increase in labour market participation. In particular, higher educational attainment and household formation decisions across generations fuel labour supply among the more recent entrants. We find some correspondence between the cyclical variation in unemployment and the business cycle. This suggests that jobless growth is not a relevant feature of the South African labour market. This paper confirms many of the causes of unemployment that are postulated in the literature. The dynamic nature of this study has furthermore allowed the separation of short-run and long-run aspects of unemployment. The decomposition approach adopted here has uncovered the linkages between the schooling system and the labour market across all generations, but, in particular, has isolated why the youngest generations have exhibited such distinct risks. The surge in labour supply amongst most recent generations (those aged 20 in 1995) can be explained by rapid exit rates from the education system resulting from overage enrolment policies enacted in the post-apartheid period. This has pushed individuals into the labour market prematurely and without the adequate skills to be absorbed into the workplace. The importance of the generational aspects of unemployment relative to life cycle and business cycle impacts suggests that policies should address the structural issues affecting each of these birth cohorts, rather than focussing on age groups per se

The dynamics of inequality in a newly settled, pre-industrial society: The case of the Cape Colony

One reason for the relatively poor development performance of many countries around the world today may be the high levels of inequality during and after colonisation. Evidence from colonies in the Americas suggests that skewed initial factor endowments could create small elites that owned a disproportionate share of wealth, human capital and political power. The Cape Colony, founded in 1652 at the southern tip of Africa, presents a case where a mercantilist company (the Dutch East India Company) settles the land and establishes a unique set of institutions within which inequality and development evolve. This paper provides a long-run quantitative analysis of trends in asset-based inequality (using Principle Components' Analysis on tax inventories) during the seventeenth and eighteenth century, allowing, for the first time, a dynamic rather than static analysis of inequality trends in a newly settled and pre-industrial society over this period. While theory testing in other societies has been severely limited because of a scarcity of quantitative evidence, this study presents a history with evidence, enabling an evaluation of the Engerman-Sokoloff and other hypotheses.South Africa, settler societies, Kuznets, income distribution, asset index, institutions, mercantilism, Dutch East India Company

The Fruit of the Vine? An Augmented Endowments-Inequality Hypothesis and the Rise of an Elite in the Cape Colony

The arrival of European settlers at the Cape in 1652 marked the beginning of what would become an extremely unequal society. Comparative analysis reveals that certain endowments exist in societies that experience a ‘persistence of inequality’. This paper shows that the emphasis on endowments may be overstated. A more general explanation allows for ‘non-tropical products’ to contribute to the rise and persistence of an elite, and consequently inequality. The focus shifts to the production method used in the dominant industry – in this case, slave labour in viticulture – and the subsequent ability of the elite to extend these benefits to products that were typically not associated with elite formation in other societies (such as wheat). The Cape Colony is used as a case study to show how the arrival of French settlers (with a preference for wine-making) shifted production from cattle farming to viticulture. A large domestic and foreign market for wine necessitated an increase in production volume. Given differences in fixed and variable costs, this resulted in knecht (wage) labour being supplanted by slave labour, an event which institutionalized the elite and ensured that the Cape remained a highly unequal society, with ramifications for present-day South Africa.Elites, South Africa, inequality, VOC, role of government, Engerman and Sokoloff

The dynamics of inequality in a newly settled, preindustrial society: The case of the Cape Colony

Inequality is a major concern in many of the world’s developing regions. South Africa is no exception, as the voluminous literature on the subject attests to (see Bhorat and Kanbur 2006, for example). Indeed, modern South Africa is one of the most unequal societies in the world, primarily as a result of institutionalised inequality under colonial segregation and Apartheid, but potentially also stemming from the set of institutions created much earlier under Dutch and British colonial rule (Terreblanche 2002). This paper will investigate inequality in the early colonial period. It is apparent in the literature that inequality is severely persistent; countries that exhibit high inequality from early stages of development generally continue to do so later on, while few policy prescriptions are successful in reversing the trend, even in times of high and sustained economic growth.

Residential Property Prices in a Sub-Market of South Africa: Separating Real Growth from Attribute Growth

This paper analyses the South African residential housing market using hedonic price theory. It builds and tests pooled OLS, fixed effects OLS, pseudo-panel and quantile regression models. The main findings are in agreement with most modern related literature. This paper highlights how house price growth rates have been calculated incorrectly due to the changing aggregate house sold every year. It calculates more accurate growth rates for the property market, yielding surprisingly different growth patterns from those originally thought. It illustrates that much of the recent house price growth was caused by attribute inflation rather than pure price inflation. It also shows that most of the pure inflation occurred at the bottom end of the market while most of the attribute inflation occurred at the top end of the market. Furthermore, it shows that house price determinants change across the house price distribution The data used was sourced from the Residential Property Price Ranger and covers 1930 house sales measured half yearly over three years; from 1 September 2004 to 31 August 2007. These sales were recorded in the towns of Stellenbosch, Somerset West, Strand and Gordon’s Bay.Hedonic pricing, Housing market, Growth rates

World Rankings of Comparative Advantage in Service Exports

World service exports have grown at a rapid rate over the past few decades. While some countries have benefited from the surge in service exports, others have been left behind. This paper provides a snapshot of the current state of trade in services using three measures of the Balassa index to reveal comparative advantage, both by country and by service sector. Ranking tables are reported for countries with a GDP above $100 billion in 2005, although 147 countries are included in the analysis. (The full results are provided in the appendix). An overview of the performance of G8 and O5 countries is also provided.services trade, RCA, competitive advantage, Balassa index, developing countries