A series of national accounts-consistent estimates of poverty and inequality in South Africa

Stellenbosch Working Paper Series No. WP09/2007

Author(s): Servaas van der Berg, Ronelle Burger, Rulof Burger, Megan Louw, Derek Yu

JEL Classification: D6, I32, I38

Keywords: Poverty, Inequality, Income distribution Analysis, South Africa

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This paper makes a unique contribution to the South African literature in combining data from an alternative source of household survey data – the All Media and Product Survey (AMPS) – with national accounts income trends for this country, in the recent tradition of research on the world distribution of income performed by Bhalla (2002), Karshenas (2003), Bourguignon and Morrisson (2002), Sala-i-Martin (2002a; 2002b), and Quah (2002), amongst others. Its usefulness lies in arriving at alternative estimates of post-transition poverty and inequality that are consistent with the story that national accounts and other official data collectively tell us about the path of the South African economy during the post-transition period. While the method of scaling survey distribution data by national accounts means is somewhat controversial, it is not clear that the distributional trends obtained using the post-transition sets of either the IESs or the Population Censuses are more reliable, given serious deficiencies in both sources of data. Adjusted distributions yield lower levels of poverty and a stronger decline in poverty during the second half of the period than the figures obtained from the raw AMPS data. While the levels of poverty obtained using adjusted income distributions are artificially low, the derived downward trend is supported by a number of official data sources.