The Effects of the South African Minimum Wage on Labour Market Outcomes for Low-Income Earners

Master project by Samuel Jones, Annanya Mahajan, Maria Oliva, Debora Reyna, Marta Vila

A maid cleans a hotel roomimage source: Supplied

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2018. The project is a required component of every master program.


Authors:

Samuel Jones, Annanya Mahajan, Maria Oliva, Debora Reyna, Marta Vila

Master’s Program:

International Trade, Finance, and Development Program

Paper Abstract:

We capitalise on the 2006 implementation of a minimum wage for the hospitality sector to make well-evidenced inferences about the impact of the upcoming National Minimum Wage (NMW) Legislation on low-wage workers. Our paper focuses on the two largest low-wage sectors currently without minimum wage regulation, which are manufacturing and construction. Two regression specifications and sensitivity analysis are used to provide insights into the implication for wages, hours worked, employment, formality and poverty rates. In light of our results and a comprehensive review of the literature, we conclude that the NMW will be largely beneficial for low-wage labourers. Our critical recommendation for policymakers is the need for complementary policies to ensure compliance and facilitate the transition of vulnerable groups (particularly black women) into the formal sector.

Conclusions and key results:

From our first specification, our analysis suggests that wages and hours worked will increase in manufacturing and construction sectors as a result of the minimum wage, mostly driven by increases for black and female workers. Although the policy is likely to increase the formality rate among male workers, we predict formality will fall among females as employers try to circumvent the legislation. Therefore it is crucial that adequate complementary policies are implemented to ensure the benefits are captured by all population groups. Our second specification exploits the variation in the median wage across provinces. In doing so, we find no significant effect on wages, which signals regional impacts of the minimum wage are fairly homogeneous. Therefore, compared to other countries adopting a similar policy, the implementation of safety-nets combating the adverse effects of the minimum wage will be relatively more straightforward. By conducting sensitivity analysis around compliance rates and poverty lines already stipulated in the literature, we predict between 100,000 and 300,000 manufacturing and construction workers will be lifted out of wage poverty as a result of the minimum wage. We combine our empirical partial equilibrium analysis with theoretical general equilibrium forces to provide statements on the anticipated lower bound of wage changes.

Download the full paper [pdf]


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Pulling together or tearing apart? Ethnic heterogeneity, natural shocks and common pool resources in rural Malawi

water

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2016. The project is a required component of every master program.


Authors:
Andrea Bacilieri, Abhijeet Khanna, Irene Pañeda FernandezJonathan Stern

Master’s Program:
Economics

Abstract:

This paper examines how ethnic heterogeneity may affect the ability of Malawian rural households to solve collective action problems. The collective action challenges are natural shocks -floods, droughts, and irregular rain and availability of common pool resources – an irrigation system, a forest, and common pasture land. We measure household welfare through maize harvest and annual consumption. We find that ethnic polarization and fractionalization are unambiguously bad for maize harvest but, under natural shocks, the size of this negative relationship is reduced. This may be due to the way natural shocks cross ethnic lines and facilitate the overcoming of ethnic differences. The bad effects of polarization remain unchanged in the presence of a shock, suggesting that this is a more intransigent problem. With respect to consumption, we find diminishing returns to increased polarization, becoming negative for high levels of polarization. Results are strongest in the presence of a communal forest. This may be due to the repeated and continuous nature of communal forest management, and the way that polarization may facilitate the formation of coherent bargaining factions.

maize

Summary:

In this paper we explore the effects of ethnic fractionalization and polarization in the presence of natural shocks and common pool resources. By greater fractionalization we mean a smaller probability that any two individuals come from the same ethnic group.  Polarization is a related concept which also takes into account the size of the bargaining factions- polarization being highest with two equally sized groups.

Our hypotheses were that ethnic heterogeneity would worsen the impact of shocks, and affect detrimentally the economic benefit derived from common pool resources. We sought to test these hypotheses by constructing a novel dataset for Malawi which combines indices of ethnic fractionalization and polarization calculated at the Territorial Authority level using the 2008 census and the Malawi Integrated Household Panel Survey for the year 2013. We argue for the exogeneity of our heterogeneity indices based on the low level of change in the ethnic makeup of Malawi over the past four years and the low level of migration within the country.

In the first part of our analysis we regress the log of maize harvest on the presence of shocks such as drought,  flood and irregular rain interacted with our ethnic heterogeneity indices and a set of agricultural, climate, household and community controls. We find that ethnic polarization and fractionalization are unambigiously bad for maize harvest. Counter to our expectations, we find that fractionalization appears to lessen the impact of a drought or irregular rain on harvest, although the net effect of increases in fractionalization remains bad for harvests. We posit tentatively that the reduction in the effect of  fractionalization in the presence of a shock could be due to the way natural shocks may cross ethnic lines and facilitate the overcoming of ethnic diff erences. The bad effects of polarization remain unchanged in the presence of a shock, suggesting that this is a more intransigent problem, and potentially a cause of enduring local level conflict.

In the second part of our analysis we regress the log of consumption on the presence of common pool resources such as forests, irrigation systems and common pasture land. We find no signicant relationship between consumption and fractionalization after testing both linear and quadratic specications. For polarization we find a quadratic relationship with consumption, which is strongest in the presence of a communal forest. This suggests that a certain degree of polarization could help communal forest management, with diminishing returns to increased polarization, becoming negative for high levels of polarization. We posit that this may be due to the repeated and continuous nature of communal forest management, and the way that polarization may facilitate the formation of coherent bargaining factions.

Through an exploration of the correlations between our ethnic heterogeneity indices and a set of community characteristics we find that greater  heterogeneity is negatively correlated with school quality and the availability of agricultural inputs. These results cast some doubt on the exogeneity of ethnic heterogeneity. However given that the ethnic indices are slow moving over time, these correlations may also suggest some of the mechanisms by which fractionalization and polarization aff ect economic development in rural Malawi. Further work might seek to explore further these mechanisms, and whether the empirical findings of this paper can be replicated in other countries and contexts.

Download the paper

Legislative Quota, Women Empowerment and Development: Evidence from Tanzania

Master project by Gregory Raiffa, Ericka Sánchez, Jan Stübner, Feodora Teti, and Andreas Wohlhüter. Barcelona GSE Master’s in International Trade, Finance, and Development

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.


Authors: 
Gregory Raiffa, Ericka Sánchez, Jan Stübner, Feodora Teti, and Andreas Wohlhüter

Master’s Program:
International Trade, Finance and Development

Paper Abstract:

This paper analyzes whether the legislative women’s quota implemented in Tanzania has helped to reduce the existing gender gap in that country. We focus on a set of development indicators indicated by the literature and an analysis of female political activity. We exploit the variation in the number of female representatives across the 131 districts of Tanzania, employing a Difference and Differences approach including fixed effects and controlling for a number of socioeconomic variables.

Our analysis indicates that the legislative women’s quota in Tanzania has led to significant reductions in the gender gap and improvements for women. The quota has effectively increased political participation in accordance with its goals, and the level of female representation continues to rise. We find evidence that the quota has reduced the gender gap in education for certain age groups, and we find indications of small improvements to female empowerment. In accordance with previous findings in other countries, we find that the increased female representation has led to substantial investments in water infrastructure that has greatly increased the number of people with access to clean water. While we do not find significant health impacts, this may be due to limitations in our dataset.

Read the paper or view presentation slides:

[slideshare id=51097405&doc=legislative-quota-women-empowerment-slides-150730114914-lva1-app6892]

Riding the barrel: How commodity exporters can maneuver through price rapids

Master project by Martin Aragoneses, Mario Giarda, and Nikolas Schöll. Barcelona GSE Master’s in Economics

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.


Authors: 
Martin Aragoneses, Mario Giarda, and Nikolas Schöll

Master’s Program:
Economics

Paper Abstract:

We develop a multi-sector small open economy DSGE model with government and exogenous sources of income, in particular where the country is a commodity producer such that income from commodity exports provides a large proportion of government revenue, making international uncertainty about the future commodity price matter. The objectives of this paper are to study the differences between level shocks and uncertainty shocks to commodity prices in terms of how they affect the economy, and to analyze the convenience of different fiscal rules when we allow the income processes to have moving uncertainty.

In an application, we estimate the parameters of a stochastic volatility model for Angola and Chile and we feed them to the model to see different economic responses to uncertainty shocks. Then, we investigate whether the fiscal rule should depend on the type of income process in general. In our evaluation, we focus on the short term implications of the rule in reducing volatility, wondering if it is better to spend the resources in the present than have an insurance against the cycles? Finally, we discuss some policy implications regarding the implementation of those rules. Can the rule be tractable by the agents on the model? Are the best rules sufficiently simple to be followed by the public and finally credible as an anchor of the expectation

Presentation Slides:

[slideshare id=51096497&doc=commodity-exports-price-rapids-150730112303-lva1-app6892]

Predicting gender disparities in attitudes towards intimate partner violence against women: a case study from Rwanda

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.


Authors: 
Mette Albèr, Ming Yu Wong, Urša Krenk & Stan deRuijter

Master’s Program:
Economics

Paper Abstract:

This paper examines the factors associated with gender disparities in attitudes towards intimate-partner violence against women (IPVAW) at the regional and household level using data from the 2010 Demo-graphic and Health Survey (DHS) in Rwanda. An OLS regression model was used at the regional level, while multivariate logistic regression models were fitted at the household level. The results show that women’s education level and women’s TV-viewing frequency are significant and consistent predictors of gender disparities at the household level, with sizeable marginal effects. More generally, many factors beyond national- and regional-level characteristics account for variation in IPVAW acceptance across genders, suggesting that more granular and sophisticated modes of analysis can help to determine the true nature of relationships between individual and household level factors and attitudes towards IPVAW.

Read the paper or view presentation slides:

Presentation Slides:

[slideshare id=50916638&doc=predicting-gender-disparities-violence-150725112951-lva1-app6892]