The persistence of apartheid regional wage disparities in South Africa

Abstract

Abstract In this article, we use a new economic geography (NEG) model to estimate the extent to which the persistence in apartheid regional wage disparities in South Africa is an outcome of economic forces such as market access. We estimate a structural wage equation derived directly from the NEG theory for 354 regions over the period 1996 to 2011. We find support for an augmented NEG model in explaining regional wage disparities across regions in South Africa, although the market access effects are highly localised in view of high distance coefficients. We also find, even after controlling for NEG and other region-specific characteristics, a persistent wage deficit in the former homelands, where under apartheid black South Africans were forcefully relocated according to their ethnic groups. Average wages of workers in homelands remained approximately 17% lower than predicted between 1996 and 2011, despite the reintegration of these regions into South Africa and the implementation of regional policies after the end of apartheid.