Economic growth and redistribution in South Africa

Abstract

The debate over appropriate methods of reducing racial income and wealth inequalities in South Africa has thus far yielded two opposing schools of thought. ‘Growth through redistribution’ and ‘redistribution through growth’ make countervailing claims concerning the efficiency gains and losses attendant upon redistribution. But the relation between economic growth and the redistribution of income and wealth may be more complex than commonly realised. From the literature surrounding Olson's (1982) Rise and Decline of Nations, especially Brock & Magee (1984) and Magee et al (1989), it can be shown that redistributive behaviour can actually increase the rate of economic growth in the short term, and depress growth in the longer term.

Notes

Senior Lecturer, Department of Economics, University of New England. Armidale NSW 2351, Australia.

The author thanks two anonymous referees for helpful comments and suggestions on anearlier draft of the paper.