Why Has Unemployment Risen in the New South Africa?

CID Faculty Working Paper No. 134

Abhijit Banerjee, Sebastian Galiani, Jim Levinsohn, and Ingrid Woolard
October 2006

A publication of the CID South Africa Growth Initiative


We document the rise in unemployment in South Africa since the transition in 1994. We describe the likely causes of this increase and analyze whether the increase in employment is due to structural changes in the economy (resulting in a new equilibrium unemployment rate) or to negative shocks (that temporarily have increased unemployment). We conclude the former are more important. Our analysis includes a multinomial logit approach to understanding transitions in individual-level changes in labor market status using the first nationally representative panel in South Africa. Our analysis highlights several key constraints to addressing unemployment in South Africa.

Keywords: South Africa, Unemployment

JEL subject codes: J08, J68, O12