Regional income evolution in South Africa after apartheid

Abstract

South Africa is one of the wealthiest countries on the African continent. The high national level (and growth) of GDP per capita, however, masks significant differences in economic performance across South Africa's regions. This paper uses (spatial) Markov chain techniques to describe the evolution of the entire cross-section regional income distribution in terms of its intra-distributional characteristics during the post-Apartheid period. The results indicate a heavily diverging regional income distribution. Relatively poor regions are likely to remain poor or become even poorer and the richest regions will maintain their lead in terms of income levels. Explicitly taking account of space furthermore shows that these high-income regions are acting as local growth poles, absorbing economic activity from their immediate surroundings. Location, trade, education, and the variable fortune of the gold mining industry seem to be important determinants of the observed evolution.