The Economy-Wide Effects of Price-Reducing Reforms in Infrastructure Services in South Africa

by DAVIES, R. & VAN SEVENTER, D.E.N., 2006
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Prices of infrastructure services in South Africa may be higher than in other countries because of imperfect competition, non-tariff barriers to trade, or inefficiencies in production. A static computerised general equilibrium (CGE) model is used to analyse the economy-wide effects of reducing telecommunications and transport prices by reforming each of these three factors. This modelling had the following results:·A reduction in infrastructure prices has a significant positive effect on the demand for labour.· Income distribution is changed, with the poorest and richest households benefiting more than middle-income ones.·  The effect of the three reforms together is greater than the sum of their impacts taken separately.· A bottleneck in the supply of highly skilled labour not only reduces the level of the impact, but also changes its sectoral and household composition.