SALDRU Contributes to UNU-WIDER’s ‘Inequality in the Giants’ Project

Image: PIRO4D/pixabay/cc

“UNU-WIDER’s Inequality in the Giants project is part of a large international collaborative research effort aimed to shed light on a set of new questions on between-country and within-country inequalities, by generating integrated datasets and applying a consistent methodology to investigate the determinants of inequality dynamics in ten of the world’s largest economies.”

Country research teams in the project include China, India, Mexico, Brazil and South Africa. Over the last three years each country team has produced four substantive research papers and a final synthesis paper. Murray Leibbrandt, one of the leaders of the global project, and SALDRU’s researchers have undertaken the South African work.

The final substantive working paper from South Africa was just released this month. The working paper by Janina Hundenborn, Leibbrandt and Ingrid Woolard is titled Drivers of Inequality in South Africa. This study uses survey data to examine the drivers of changes in the income distribution over the post-apartheid period. Labour market incomes dominate both the aggregate level of inequality in any particular year as well as the changes in aggregate income inequality over time. The roll out of an extensive set of social grants has been the crucial, single equalizing influence on the income distribution. The dramatic reduction in household size as well as the increasing share of adults in households have been very important demographic changes working in opposite directions as drivers of inequality.

Hundenborn, Woolard and Jon Jellema produced a working paper titled, The effect of top incomes on inequality in South Africa. This research complemented the first study by using tax data to show that survey data underestimate the income sources that are important to those at the top end, including interest income and capital gains. If total income that is inclusive of these sources is added to top-end incomes, measured inequality increases markedly.

Earlier in 2018, Arden Finn and Leibbrandt produced the working paper, The evolution and determination of earnings inequality in post-apartheid South Africa, to unpack earnings inequality trends and their drivers in the South African labour market between 2000 and 2014. Earnings inequality has risen over this period, driven primarily by the increasing rewards given to the thin group with post-secondary education. This group is younger, which accords with a reduced influence over time for experience in positioning labour market participants in the earnings distribution. The research also flags the importance of a data problem in 2012 in the earnings data. This problem is influential enough to distort the analysis of earnings inequality trends that stretch across 2012. So, the analysis of education’s role, for example, is very different running from 2000 to 2011 rather than 2000 to 2014.

Moving to policy, Ingrid Woolard and Mashekwa Maboshe produced a working paper on Revisiting the impact of direct taxes and transfers on poverty and inequality in South Africa. This paper updates the findings from previous studies and shows that our direct tax and our social expenditure programmes remain progressive on the whole. But, within this broad picture, there are a set of tax benefits and deductions that are strongly regressive.

In 2019, Saldrupians will be working under UNU-WIDER’s lead with their collaborators on a book project using all of the country case studies. Leibbrandt and Woolard are non-resident senior research fellows of UNU-WIDER.