Masters Degrees (Economics and Finance)

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Browsing Masters Degrees (Economics and Finance) by Author "Geldenhuys, Jean-Pierre"

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    Reservation wages, transitions from, and the duration of, unemployment in South Africa
    (University of the Free State, 2021) Haasbroek, Minette; Geldenhuys, Jean-Pierre
    South Africa has one of the highest unemployment rates in the world, with women, youths, and people with low levels of education being especially likely to be unemployed. Most South African unemployed are also long-term unemployed. Persistently high unemployment and high long-term unemployment rates have substantial negative socio-economic implications. This study investigates the effect of reservation wages on transitions from unemployment and the duration of unemployment. Furthermore, the effects of age, education and gender on unemployment transitions and unemployment duration are also assessed. South African household survey panel data from the third (data collected in 2012) and fourth (data collected in 2014 and 2015) waves of the National Income Dynamics Study (NIDS) were used to this end. In addition to descriptive statistics (transition matrices, proportions/frequencies and means), discrete choice models (binomial and multinomial logits and probits) for unemployment transitions, as well as discrete choice models (binomial logit and probit) for unemployment duration were estimated. Discrete choice models were chosen as the appropriate method due to the nature of the available data.The descriptive statistics and the results of the discrete choice models indicated that higher reservation wages were associated with higher probabilities to transition to employment and to inactivity relative to remaining unemployed. People with higher reservation wages were less likely to be long-term unemployed. These results contradict the theoretical job search theory, a possible suggestion for this occurrence is that those that transitioned to employment had individual characteristics that justified higher reservation wages and those that transitioned to inactivity had unrealistic reservation wages given their individual characteristics. Age, education, and gender were also found to be associated with both unemployment transitions and unemployment duration. Generally, age was positively associated with transitions to employment, transitions to inactivity and long-term unemployment, indicating that older workers were more likely to become employed or become inactive relative to staying unemployed and those who remained unemployed were more likely be longterm unemployed. People with higher levels of educational attainment were more likely to transition to employment, while those with lower levels of educational attainment were more likely to transition to inactivity. While the descriptive analysis showed that those with higher levels of educational attainment were generally less likely to be longterm unemployed, this result was not evident in the duration regressions. Men were more likely to transition to employment and less likely to transition to inactivity than women. Women were more likely to be long-term unemployed. To increase transitions to employment, decrease transitions to inactivity and to decrease long-term unemployment, policymakers must target vulnerable groups like women, and the youth. Higher educational attainment, especially the completion of secondary education, may also play a critical role in helping unemployed individuals to transition to employment and lower the duration of their unemployment spells.