Agricultural Distortions, Poverty, and Inequality in South Africa

South Africa has rapidly reduced trade barriers since the end of Apartheid, yet agricultural production and exports have remained sluggish. Also, poverty and unemployment have risen and become increasingly concentrated in rural areas. This paper ex...

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Bibliographic Details
Main Authors:	Hérault, Nicolas, Thurlow, James
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2017
Subjects:	AGRICULTURAL COMMODITIES AGRICULTURAL GROWTH AGRICULTURAL LAND AGRICULTURAL LIBERALIZATION AGRICULTURAL OUTPUT AGRICULTURAL POLICIES AGRICULTURAL POLICY AGRICULTURAL PRICES AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTS AGRICULTURAL SECTOR AGRICULTURAL SUPPORT AGRICULTURAL WAGES AGRICULTURAL WORKERS AGRICULTURE ANIMAL FEEDS APARTHEID BAKERY PRODUCTS BEEF BEVERAGES CAPITAL GOODS CAPITAL INCOME CAPITAL RETURNS CEREALS COMMERCIAL AGRICULTURE COMMERCIAL FARMS COMMODITY COMMODITY MARKETS COMMODITY PRICES COMPETITIVENESS CONFECTIONERY CONSTANT RETURNS TO SCALE CONSUMER PRICE INDEX CONSUMER SPENDING CONSUMPTION EXPENDITURE COST OF INVESTMENT CURRENT ACCOUNT CURRENT ACCOUNT BALANCE DAIRY DECISION MAKING DEMOGRAPHIC DEPRECIATION DEVELOPING COUNTRIES DISPOSABLE INCOME DISPOSABLE INCOMES DIVIDENDS DOMESTIC DEMAND DOMESTIC GOODS DOMESTIC PRICE DOMESTIC PRICES DOWNWARD PRESSURE DRIED FRUIT ECONOMETRICS ECONOMIC PERFORMANCE ECONOMIC STRUCTURE ELASTICITY ELASTICITY OF SUBSTITUTION EMPLOYMENT STATUS EXCHANGE RATE EXPORT COMPETITIVENESS EXPORT EARNINGS EXPORT GROWTH EXPORT PERFORMANCE EXPORT SECTOR EXPORT SECTORS EXPORT SUBSIDIES EXPORTS FACTORS OF PRODUCTION FARM PRODUCTS FISCAL DEFICIT FLEXIBLE EXCHANGE RATE FOOD ITEMS FOOD POLICY FOOD POLICY RESEARCH FOOD PRICES FOOD PROCESSING FOOD PRODUCTS FOREIGN CURRENCY FOREIGN EXCHANGE FOREIGN MARKETS FOREIGN TRADE FRUIT FRUITS FULL LIBERALIZATION GDP GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GINI COEFFICIENT GLOBAL MARKETS GRAINS GROSS DOMESTIC PRODUCT HOUSEHOLD INCOME HOUSEHOLD WELFARE IMPORT IMPORT DEMAND IMPORT PRICES IMPORT TARIFF IMPORT TARIFFS IMPORTS INCOME INCOME DISTRIBUTION INCOME ELASTICITIES INCOME INEQUALITY INCOME SHARES INCOME TAX INCOME TAXES INEQUALITY INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE INTERNATIONAL TRADE INVESTMENT DEMAND INVESTMENT SPENDING IRRIGATION JOB CREATION LABOR FORCE LABOR MARKET LEGUMES LEVEL OF INVESTMENT LIBERALIZATIONS LIVESTOCK PRODUCTION MACROECONOMIC SIMULATION MACROECONOMIC STABILITY MAIZE MARKET PRICES MEAT MEATS NATIONAL ECONOMY NATIONAL POVERTY NOMINAL WAGE NOMINAL WAGES OILS & FATS PER CAPITA INCOME POLITICAL ECONOMY POOR POOR HOUSEHOLDS POVERTY ALLEVIATION POVERTY LINE POVERTY LINES POVERTY REDUCTION PRICE DISTORTIONS PRICE OF EXPORTS PRIVATE CONSUMPTION PRIVATE SAVINGS PROCESSED FOODS PRODUCT MARKETS PRODUCTION FUNCTIONS PROFIT MAXIMIZATION REAL APPRECIATION REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXPORTS REAL GDP REAL IMPORTS RELATIVE PRICES REMOTE REGIONS RESERVE BANK RURAL RURAL AREAS RURAL DEVELOPMENT RURAL HOUSEHOLDS RURAL INCOMES RURAL LIVELIHOODS RURAL POVERTY RURAL WORKERS SAVINGS SHEEP MEAT SKILLED WORKERS SLOWDOWN SMALL COUNTRY SMALLHOLDER FARMERS STRUCTURAL ADJUSTMENT SUGAR SUGAR PRODUCTS SUGAR REFINING SUGARCANE TAX TAX RATE TAX RATES TAX STRUCTURE TOTAL EXPORT TOTAL EXPORTS TOTAL IMPORTS TRADABLE GOODS TRADE AGREEMENTS TRADE BARRIERS TRADE DEFICIT TRADE LIBERALIZATION TRADE POLICIES TRADE POLICY TRADE REFORMS TRADE SHOCK UNEMPLOYMENT UNEMPLOYMENT RATE UTILITY FUNCTION VEGETABLES WAGE DIFFERENTIALS WAGES WHEAT WORLD DEMAND WORLD DEVELOPMENT INDICATORS WORLD PRICE WORLD PRICES WORLD TRADE WORLD TRADE ORGANIZATION
Online Access:	http://documents.worldbank.org/curated/en/761561468101340921/Agricultural-distortions-poverty-and-inequality-in-South-Africa http://hdl.handle.net/10986/28151

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Summary:	South Africa has rapidly reduced trade barriers since the end of Apartheid, yet agricultural production and exports have remained sluggish. Also, poverty and unemployment have risen and become increasingly concentrated in rural areas. This paper examines the extent to which remaining price distortions, both domestic and foreign, are contributing to the underperformance of the agricultural sector vis-a-vis the rest of the economy. The author draws on a computable general equilibrium (CGE) and micro-simulation model of South Africa that is linked to the results of a global trade model. This framework is used to examine the effects of eliminating global and domestic price distortions. Model results indicate that South Africa's agricultural sector currently benefits from global price distortions, and that removing these will create more jobs for lower-skilled workers, thereby reducing income inequality and poverty. The author also fined that South Africa's own policies are biased against agriculture and that removing domestic distortions will raise agricultural production. Job losses in nonagricultural sectors will be outweighed by job creation in agriculture, such that overall employment rises and poverty falls. Overall, the findings suggest that South Africa's own policies are more damaging to its welfare, poverty and inequality than distortionary policies in the rest of the world. Existing national price distortions may thus explain some of the poor performance of South Africa's agricultural sector and rural development.

Agricultural Distortions, Poverty, and Inequality in South Africa

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