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Exploring unbalanced growth: Understanding the sectoral structure of the South African economy

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  • Fedderke, Johannes W.
Abstract
This paper presents empirical evidence in support of an account of unbalanced growth in the South African economy: an interaction between sectorally differentiated total factor productivity growth, with a price elasticity of demand below unity. As sectors with faster TFP growth produce more real output over time, their relative prices fall, with the price changes triggering increases in consumption demand that less than offset the price fall. As a result sectoral shares in nominal output decline. This generates a structural shift of the labour factor input to low productivity sectors over time. Policies targeting returns to labour and wage growth alone will be insufficient to address unemployment. Instead, policies targeting the supply side of the economy and international competitiveness are likely more effective for raising employment and growth. The paper is the first to test the TFP-price elasticity mechanism on emerging market data, and a first explanation of unbalanced growth in South Africa.

Suggested Citation

  • Fedderke, Johannes W., 2018. "Exploring unbalanced growth: Understanding the sectoral structure of the South African economy," Economic Modelling, Elsevier, vol. 72(C), pages 177-189.
    • Handle: RePEc:eee:ecmode:v:72:y:2018:i:c:p:177-189
    DOI: 10.1016/j.econmod.2018.01.012
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    4. Johannes W. Fedderke, 2022. "Identifying supply and demand shocks in the South African Economy, 1960–2020," South African Journal of Economics, Economic Society of South Africa, vol. 90(3), pages 349-389, September.
    5. Cheng, Mingyang & Yansui Liu, & Zhou, Yang, 2019. "Measuring the symbiotic development of rural housing and industry: A case study of Fuping County in the Taihang Mountains in China," Land Use Policy, Elsevier, vol. 82(C), pages 307-316.

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    More about this item

    Keywords

    Unbalanced growth; Supply-side; Differential TFP growth; South Africa;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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