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NIDS Discussion Paper 2016/01
Title: The dynamics of poverty in South Africa*
Author(s): Arden Finn and Murray Leibbrandt
We analyse the determinants of South Africans moving into and out of poverty over the first four waves of the National Income Dynamics Study (NIDS) for the years 2008 to 2014/2015. The first descriptive sections of the study focus on the balanced panel of NIDS respondents and find that a relatively high poverty exit rate was accompanied by a substantial proportion of the population being trapped in severe poverty. The roles of demographic versus income changes over time reveal that changing household composition is the largest trigger of poverty entry and exit, and that increasing income from government grants is the main trigger precipitating poverty exit for about one quarter of our sample. We then estimate an endogenous switching model that controls for initial conditions and selective attrition on the full sample of respondents in order to better understand what traps South Africans in poverty. We find that ignoring the correlations between the unobservables affecting initial conditions, sample retention and poverty transitions can lead to substantially biased results, and that there is significant genuine state dependence underlying poverty dynamics. This has important policy implications, as preventing people from falling into poverty in the first place is likely to yield greater returns that targeting the individual correlates of poverty directly.
*This is an updated version (version 3) of the paper ‘The dynamics of poverty in the first four waves of NIDS’ from which the NIDS Wave 4 Overview Document drew.
NIDS Discussion Paper 2016/02
Title: Patterns of persistence: Intergenerational mobility and education in South Africa*
Author(s): Arden Finn, Murray Leibbrandt and Vimal Ranchhod
How should the correlation between the earnings of parents and children in South Africa be calculated in the presence of high unemployment, and what is the role of education in determining this relationship? We use the first four waves of the National Income Dynamics Study (NIDS) for 2008 to 2014/15, and the 1993 Project for Statistics on Living Standards and Development (PSLSD) to investigate the shape of the association between parental and child earnings across the earnings distribution, and find that the correlation is strongest at the ends of the distribution. We correct for possible biases that arise from co‐resident parent‐child pairs, and from selection into labour market participation in South Africa’s high‐unemployment society. We find that correcting for selection into employment increases the intergenerational elasticity of earnings by approximately 10 per cent. We unpack the role of education in determining the association of intergenerational earnings and find that the impact is strongest at the bottom of the earnings distribution, and that education accounts for approximately 40 per cent of the total intergenerational earnings elasticity.
*This is an updated version (version 3)of the paper with the same title from which the NIDS Wave 4 Overview Document drew.
NIDS Discussion Paper 2016/03
Title: Determinants of remittances in South Africa
Author(s): Mduduzi Biyase and Fiona Tregenna
This paper analyses household‐level determinants of the probability and level of domestic remittances in South Africa over the period 2008 to 2014‐2015. We exploit all four waves of the National Income Dynamics Survey (NIDS) data to analyse the determinants of remittances in a panel setting using random‐effects Tobit, Heckman selection, and two‐part model approaches. The panel nature of this data allows us to incorporate individuals’ unobserved time‐constant characteristics (or unobserved heterogeneity) in the models, a step that enriches the analysis and yields more accurate results than if we were to use only cross‐sectional analysis. It also allows us to incorporate information about the dynamics of remittance behaviour for the same households. However, data availability restricts the analysis to determinants associated with the recipient households. We find the determinants of the probability of remitting to be non‐identical to the determinants of the level of remittances. Determinants of both include the age, race, education level, and employment status of the household head, and the income and the type of area of the household. The gender of the household head and the size of the household are also important determinants, but appear to have a positive effect on the probability of remitting, yet a negative effect on the amount remitted. These results shed light on the factors that affect whether or not families receive remittances and, if they do, how much.
NIDS Discussion Paper 2016/04
Title: Subjective Well-Being Adult South Africans’ Life Satisfaction (2008 - 2014)
Author(s): Catherine Kannermeyer
This discussion paper examines subjective well‐being using the National Income Dynamics Study. The survey is an individual level panel survey, with data collected biannually, with 4 waves available, from 2008‐2015. The survey is particularly rich, and in addition to economic measures of well‐being, it includes individual level data on subjective well‐being. Subjective well‐being is measured by asking respondents to rate their level of life satisfaction, at the point of being interviewed, and to think about how their current level of life satisfaction relates to their level of satisfaction historically.
Kahneman and Kreuger (2005) report that “while various measures of well‐being are useful for some purposes, it is important to recognize that subjective well‐being measures features of individuals’ perceptions of their experiences, not their utility as economists typically conceive of it. Those perceptions are a more accurate gauge of actual feelings if they are reported closer to the time of, and in direct reference to, the actual experience.” Therefore, studying subjective well‐being is worth pursuing, as actual feelings are a relevant gauge of an individual’s life satisfaction. These perceptions may be distorted – but are arguably the best measure of how an individual’s experience of the world at a given point in time is translated into well‐being.
NIDS Discussion Paper 2016/05
Title: Maternal and child migration in post-apartheid South Africa: evidence from the NIDS panel study
Author(s): Katharine Hall
Children are affected by adult migration, whether or not they themselves move. Yet little attention has been paid to patterns of child mobility and changing household contexts in South Africa, and the ways in which these relate to patterns of adult migration. Internal migration in South Africa is historically associated with the social engineering and enforced fragmentation of families that took place under apartheid. In particular, controls on population movement, together with limited residential rights in cities and other places of economic activity, restricted the ability of African families to migrate and live together, while dual housing arrangements allowed for circular movement between urban and rural homes. The term "oscillating migration" was used to describe mobility between urban and rural areas. Rather than being viewed as physically bounded and static units, households came to be viewed as straddling these nodes, both of which could include resident and non‐resident members. Contrary to expectations, there was no substantial increase in permanent urban migration when the apartheid‐era controls on population movement were removed (Posel 2006). Instead, temporary labour migration has remained an important livelihood strategy for many households, and extended and dual household forms have persisted.
NIDS Discussion Paper 2016/06
Title: Analysing the links between child health and education outcomes: Evidence from NIDS Waves 1 – 4
Author(s): Daniela Casale
This paper explores the relationship between child nutrition and schooling outcomes using data from the National Income Dynamics Survey (NIDS) panel data. The recent release of the NIDS panel data from 2008-2015 presents the first opportunity to examine the implications of early child health on human capital accumulation at the national level. This work estimates the relationship between poor nutrition, measured by stunting and obesity in early childhood, and later schooling outcomes among children aged 7 to 14 years. The results suggest that young children who were stunted in Wave 1 go on to complete fewer years of schooling than the children who did not suffer from early undernutrition, not only because they enter school at a later age, but because they progress more slowly through the schooling system. In contrast, no discernible relationship is identified between obesity status and schooling outcomes in young children.
NIDS Discussion Paper 2016/07
Title: Inter-household transfers in South Africa: prevalence, patterns and poverty
Author(s): Dorrit Posel
In this paper, I use unique and detailed data, collected in four waves of the National Income Dynamics Study, to provide a descriptive overview of inter‐household transfers in South Africa, including their prevalence and size, and how they compare with other developing countries. I take advantage of the panel nature of the data to investigate whether the likelihood that individuals receive or send transfers responds to changes in the economic wellbeing and composition of the individual’s household, and to the receipt of public transfers or social grants. I also use the panel data to explore persistence in private transfers over time, and to compare the relative contribution of private and public transfers to poverty reduction.
NIDS Discussion Paper 2016/08
Title: Socio-economic correlates with the prevalence and onset of diabetes in South Africa: Evidence from the first four waves of the National Income Dynamics Study
Author(s): Velenkosini Matsebula and Vimal Ranchhod
We make use of multiple waves of National Income Dynamics Study data, from 2008 to 2015, to investigate the socio‐economic factors that correlate with the prevalence and onset of diabetes. Our analysis follows a cohort of 3470 older adults aged forty and above, who are interviewed four times over a six year period. We use linear probability models and estimate the likelihood of diabetes as a function of age, race, gender, education, income, exercise, and obesity. Our primary findings are that age and obesity correlate strongly with diabetes, while income does not have a statistically significant effect, conditional on the other covariates. Our regression estimates indicate that, of individuals who reported not being diabetic in Wave 1, those who were obese and morbidly obese were 12.9 and 16.7 percentage points more likely to have experienced the onset of diabetes respectively, relative to those with a BMI in the healthy range. In addition, frequent exercise does appear to have a slight protective effect against the onset of diabetes, and there is some evidence that better educated people have a lower risk of onset of the disease.
NIDS Discussion Paper 2016/09
Title: The Post Matriculation Enrolment Decision: Do Public Colleges Provide Students with a Viable Alternative? Evidence from the First Four Waves of the National Income Dynamics Study
Author(s): Nicola Branson and Amy Kahn
This paper uses National Income Dynamic Survey (NIDS) data from 2008‐2015, together with administrative data on South African schools and post‐secondary institutions, to estimate the impact of home background, school quality and scholastic ability during a learner’s final years of schooling on enrolment in post‐secondary education. We analyse enrolment patterns for each of three institution types separately, namely public universities, public Technical and Vocational Education and Training (TVET) colleges, and private colleges. In light of government’s current policy to expand TVET colleges over the next two decades, we focus specifically on this institutional category. In particular, we investigate the role of financial constraints in the enrolment decision, in order to assess the viability of the plan to expand post‐secondary education via the TVET sector. Through a series of multinomial
logit regressions, we find that household income during matric year is highly significant in determining enrolment in all types of post‐secondary institutions, including TVETs. Individual ability (as measured by numeracy test scores) is also important in explaining enrolment in both universities and TVETs, even after controlling for socio‐economic background and school quality variables. These findings suggest that increasing the number of seats available at TVET colleges, without expanding funding opportunities and assessing the level of course content, is unlikely to result in the target of 2.5 million learners in TVET by 2030 being met.
NIDS Discussion Paper 2016/10
Title: The Measurement and Distribution of Household Wealth in South Africa using the National Income Dynamics Study (NIDS) Wave 4
Author(s): Reza C. Daniels & Taryn Augustine
This paper examines the household wealth construct as measured in NIDS Wave 4 (2014‐2015). Questionnaire design changes in the wealth module between NIDS Waves 2 and 4 include the addition of questions on household possessions assets and the inclusion of a variable for private property versus communal property rights. For derived household net worth, the inclusion of household possessions assets reduces estimates of household inequality in Wave 4 compared to Wave 2, and alters the portfolio composition of household assets most markedly for low income households. A unique feature of NIDS Wave 4 is that it now allows for accurate identification of South Africa’s dual land tenure system. In Tribal Authority Areas (TAAs), households rarely have to finance the acquisition of a home partly because of communal property rights. This results in a very different portfolio of household liabilities than in other areas in the country, where real estate debt dominates the liability portfolio. When comparing NIDS aggregated national totals for estimates of household assets, liabilities and net worth with South African Reserve Bank (SARB) totals that use the national accounts, the NIDS Wave 4 data differs from the SARB data most significantly for financial assets, which are severely under‐estimated in NIDS. This is likely a result of disproportionately high attrition among high‐income households in the sample over time that cannot be compensated for sufficiently with survey weights. This suggests that it is urgent that the NIDS sample be refreshed, with an oversampling of high‐income households necessary.
NIDS Discussion Paper 2016/11
Title: The Impact of Maternal Death on Children’s Health and Education Outcomes
Author(s): Cally Ardington and Megan Little
The HIV/AIDS pandemic continues to have a devastating impact, particularly on the lives of sub‐Saharan African children. In addition to reversing the downward secular trend in infant and child mortality, HIV/AIDS has orphaned millions of children. Substantial progress has been made in reducing mother‐to‐child transmission, but rates of orphanhood continue to climb despite increased availability of antiretroviral therapy. UNAIDS estimates that in sub‐Saharan Africa in 2014, 11 million children under the age of 18 had lost one or both of their parents to AIDS (UNAIDS 2016).
Recent empirical evidence suggests that children in sub‐Saharan Africa who have suffered parental loss are at risk of poorer educational outcomes (Beegle, de Weerdt and Dercon 2006; Bicego, Bicego et al 2003; Case, Paxson and Ableidinger 2004; Evans and Miguel 2007; Guarcello et al. 2004; Monasch and Boerma 2004; Ardington and Leibbrandt 2010; Case and Ardington 2006; Ardington 2009). In South Africa, there are significant differences in the impact of a mother and a father’s death. The loss of a child’s mother is a strong predictor of poor schooling outcomes, while the loss of a child’s father is a significant correlate of poor household socioeconomic status. In two localised longitudinal studies, Case and Ardington (2006) and Ardington and Leibbrandt (2009) use the timing of mothers’ deaths relative to children’s educational shortfalls to argue that mothers’ deaths have a causal effect on children’s education. They cannot, however, answer the question of why children whose mothers have died fall behind in school.
NIDS Discussion Paper 2016/12
Title: Cross-Sectional Features of Wealth Inequality in South Africa: Evidence from the National Income Dynamics Study
Author(s): Samson Mbewe and Ingrid Woolard
In this paper, we examine the cross‐sectional distribution of wealth in South Africa by using survey data from the National Income Dynamics Study (NIDS) for 2010‐2011 (wave 2) and 2014‐2015 (wave 4). Our results show that wealth inequality is very high, with the bottom half of the population owning very little and the top decile holding about 85% of total wealth in 2010‐2011 and 2014‐2015. While the results also show that wealth inequality within‐Race and between‐Race are high, we find that wealth inequality within‐Race is higher and particularly in the Black race, with a greater concentration of the Black population at the bottom end of the wealth distribution. Further, the results show that the racial wealth gap between the Black race and the White race is high, with a typical Black household holding relatively less than 5% of the wealth held by a typical White household. Finally, we find that wealth varies significantly over the age profile, suggesting support for the life cycle hypothesis.
NIDS Discussion Paper 2016/13
Title: What Difference Does A Year Make? The Cumulative Effect of Missing Cash Transfers on Schooling Attainment
Author(s): Katherine Eyal and Lindokuhle Njozela
South Africa's largest poverty alleviation tool, the child support grant, has benefited more than 12 million children, with many positive outcomes. However the implementation was not perfect ‐ the means test threshold was left unadjusted for ten years, requiring a more than one hundred percent adjustment when the government finally saw fit to change the threshold in 2008. In the interim, very many children missed out on the benefits of the grant.
Using exogenous changes to the age and income threshold values, this paper estimates the cumulative impact of missing grant receipt. We find that a South African child born in 1994 missed out on a year's worth of schooling compared to those born just one year later. The costs were not limited only to schooling attainment; increasing the means test threshold and rates of receipt appears to have improved maternal mental health.
NIDS Discussion Paper 2016/14
Title: Towards measuring social cohesion in South Africa
Author(s): Lindokuhle Njozela, Ingrid Shaw and Justine Burns
This paper uses data collected across the four waves of the National Income Dynamics Study (NIDS) to construct a measure of social cohesion for South Africa. We compare our index to one derived using the Afrobarometer data and find a large degree of consistency in trends in the index and its constituent components over time across the two datasets. However, there is less consistency in the measures once one moves to lower levels of geographic disaggregation. We also find far less variability in the constructed index relying on NIDS panel data as opposed to the repeated cross‐sections from Afrobarometer. Having derived the index, we then correlate it with a variety of indicators of social and economic well‐being. We show that higher levels of education, per capita income and employment are positively associated with higher social cohesion while social cohesion is negatively associated with poverty, service delivery protest and perceptions of crime. In addition, municipal policy and competence are closely associated with higher social cohesion. While this work is exploratory, it is encouraging, and suggests new opportunities for future research to begin to take seriously the link between social cohesion and economic and social development.
NIDS Discussion Paper 2016/15
Title: Vulnerability and the Middle Class in South Africa
Author(s): Rocco Zizzamia, Simone Schotte, Murray Leibbrandt and Vimal Ranchhod
Apartheid imposed a rigid racialised system of unequal resource distribution on South African society, resulting in one of the highest rates of inequality in the world. Since apartheid ended in 1994, this aggregate income inequality has not improved. The persistence of extraordinarily high levels of poverty and inequality makes the definition and measurement of the ‘middle class’ particularly challenging. A review of previous work on the middle class, both in South Africa and in other developing countries, illustrates the difficulty of addressing this challenge. Recent research showing growth in the South African middle class often classifies as ‘middle class’ households which either fall below the basic‐needs poverty line or are vulnerable to poverty. This notion of economic insecurity conflicts with the sociological understanding of the middle class as an ‘empowered’ class.
In this paper, we attempt to develop a conceptually and empirically rigorous approach to defining and measuring the middle class in South Africa. Arguing that the notion of ‘empowerment’ is central to the social and political meanings of ‘middle class’, we propose an empirical strategy that uses (in)vulnerability to poverty as the key criterion defining middle class status. Using the panel dimension of the nationally representative National Income Dynamics Study (NIDS), we present a probability model that predicts the risk of staying in or falling into poverty over a six‐year time frame, depending on a broad array of initial household conditions and resources. We select the expenditure level associated with a maximum risk to poverty of 10 percent as the lower bound of the middle class and the expenditure level associated with effective invulnerability to poverty as the upper bound. This gives us a monthly per capita expenditure range of R3,104 to R10,387 (January 2015 prices). Using these thresholds, we find that the middle class in South Africa is smaller than previous research has suggested (with a population share of about 13.5 percent in 2014), and has grown sluggishly since 1993. Despite this, there has been considerable demographic transformation within the middle class, with Africans now outnumbering whites by a significant margin.
NIDS Discussion Paper 2016/16
Title: Drivers of Inequality in South Africa
Author(s): Janina Hundenborn, Ingrid Woolard and Murray Leibbrandt
The first democratic elections in 1994 brought about the promise for equal opportunity and an overall improvement of living standards for the majority of the South African population. The newly elected government promised to combat high levels of poverty as well as inequality inherited from the apartheid regime. However, 20 years after the democratization of South Africa, levels of inequality remain stubbornly high. Therefore, this paper analyzes the role of income from different sources in order to investigate which one(s) continue to drive those high levels of inequality. We use data from the 1993 Project for Statistics on Living Standards and Development (PSLSD) to present a detailed snapshot of the level and texture of inequality that was prevalent at the end of the apartheid regime. Furthermore, we use recent data from the National Income Dynamics Study (NIDS) from 2008 and 2014 to assess the role of different income sources in overall inequality and compare these contemporary snapshots to the results from 1993. We do so by applying two different decomposition methods to inequality measured by the Gini coefficient. The first is static, explaining the role of income sources in driving income inequality at each of the three points in time. The second is dynamic, explaining the role of changing income sources in changes in income inequality over time. We find that over the past 20 years, labour income has been the major contributor to overall inequality. The results indicate that a drop in inequality from labour market sources led to a decrease in overall income inequality. A more nuanced decomposition technique within the dynamic decomposition allows us to extract the effect of changes in household demographics on inequality from these results. This shows that when factors of household composition are accounted for, changes in all of the different income sources have led to a decrease in inequality between 2008 and 2014 in particular and over the entire post‐apartheid period in general.
NIDS Discussion Paper 2016/17
Title: The extent of churn in the South African youth labour market: Evidence from NIDS 2008-2015
Author(s): Kim Ingle and Cecil Mlatsheni
The transition from schooling to work for many South African youth (aged 15-34 years) is neither a smooth nor immediately successful one. This is apparent in the persistently high youth unemployment rate that has been an enduring feature of the labour market. However, what the unemployment rate does not reveal is the degree to which it is the same youth who remain persistently unemployed, rather than moving between labour market states. In other words the unemployment statistic does not give any indication of the degree of churn in the South African youth labour market. This paper explores the nature and extent of this churn by investigating patterns of persistence of employment, persistence of unemployment, and movement between these states. To investigate these labour mobility issues, the first four waves of the National Income Dynamics Study (NIDS) are analysed. The data for the first wave of NIDS was collected in 2008, the second in 2010-2011, the third in 2012, and the fourth in 2014-2015. A balanced panel of Wave 1 youth is used to look at transitions in labour market states from Wave 1 to Wave 4.