The growth, poverty and inequality nexus in South Africa: Cointegration and causality analysis

Figures & data

Figure 1. GDP, poverty and inequality performances in South Africa. Source: South African Reserve Bank, Statistic South Africa via Quantec EasyData database, World Bank Databank, African Development Indicators.

Figure 2. The poverty–growth–inequality triangle. Source: Bourguignon (2003).

Table 1. Panel unit roots test results.

Series	Model	LLC	IPS	Fisher-ADF
GDP	Constant Constant and trend None	−0.66 (0.26) −1.71 (0.04)** 17.84 (1.00)	3.26 (0.99) −1.81 (0.03)**	4.32 (0.99) 28.39 (0.10) 0.00 (1.00)
Income poverty	Constant Constant and trend None	−3.27 (0.00)*** −2.96 (0.00)*** −4.55 (0.00)***	−3.03 (0.00)*** −0.67 (0.25)	36.54 (0.00)*** 17.85 (0.46) 51.99 (0.00)***
Non-income poverty	Constant Constant and trend None	−3.80 (0.00)*** −2.78 (0.00)*** 1.92 (0.97)	0.07 (0.53) −3.56 (0.00)***	22.91 (0.19) 47.05 (0.00)*** 0.19 (1.00)
Income inequality	Constant Constant and trend None	−6.95 (0.00)*** 0.79 (0.79) −7.12 (0.00)***	−4.06 (0.00)*** 4.33 (1.00)	47.32 (0.00)*** 1.77 (1.00) 83.15 (0.00)***
Land inequality	Constant Constant and trend None	2.19 (0.99) 1.37 (0.91) 0.29 (0.61)	0.30 (0.62) −1.02 (0.15)	25.18 (0.12) 29.79 (0.10) 16.10 (0.59)
Education inequality	Constant Constant and trend None	2.04 (0.98) −1.29 (0.10) −4.85 (0.00)***	4.89 (1.00) −0.05 (0.48)	1.03 (1.00) 16.28 (0.57) 43.88 (0.00)***

Notes: All three tests were used to examine the null hypothesis of unit roots. **Statistical significance at 5%. ***Statistical significance at 1% level. IPS = Im et al. (2003) panel unit root test; LLC = Levin et al. (2002) panel unit root test. ADF = augmented Dickey-Fuller.

Source: Author's calculations from Eviews 8.

Table 2. Cointegration test results.

Trace tests				Maximum eigenvalue tests
		-trace statistic	Prob.			-max statistic	Prob.
Non-income poverty, GDP and income inequality
r = 0	r1	202.0	0.00*	r = 0	r = 1	136.8	0.00*
r1	r2	100.1	0.00*	r = 1	r = 2	63.16	0.00*
r2	r3	80.87	0.00*	r = 2	r = 3	80.87	0.00*
Non-income poverty, GDP and education inequality
r = 0	r1	85.94	0.00*	r = 0	r = 1	53.83	0.00*
r1	r2	51.82	0.00*	r = 1	r = 2	35.69	0.00*
r2	r3	54.23	0.00*	r = 2	r = 3	54.23	0.00*
Non-income poverty, GDP and land inequality
r = 0	r1	97.65	0.00*	r = 0	r = 1	97.65	0.00*
r1	r2	132.9	0.00*	r = 1	r = 2	133.8	0.00*
r2	r3	26.26	0.09*	r = 2	r = 3	26.26	0.09*
Income poverty, GDP and income inequality
r = 0	r1	139.8	0.00*	r = 0	r = 1	91.73	0.00*
r1	r2	74.01	0.00*	r = 1	r = 2	65.76	0.00*
r2	r3	36.38	0.00*	r = 2	r = 3	36.38	0.00*
Income poverty, GDP and education inequality
r = 0	r1	71.92	0.00*	r = 0	r = 1	67.62	0.00*
r1	r2	23.48	0.17	r = 1	r = 2	17.53	0.49
r2	r3	33.20	0.02*	r = 2	r = 3	33.20	0.02*
Income poverty, GDP and land inequality
r = 0	r1	97.65	0.00*	r = 0	r = 1	97.65	0.00*
r1	r2	124.9	0.00*	r = 1	r = 2	116.8	0.00*
r2	r3	41.59	0.00*	r = 2	r = 3	41.59	0.00*

Note: *Rejection of the null hypothesis of no cointegration at least at the 10% level of significance.

Source: Author's calculations from Eviews 8.

Table 3. Panel causality test results.

	Null hypothesis	W-statistic	Zbar-statistic	Prob.
A	growth does not homogeneously cause ipov	0.1333	−1.6480	0.0994*
	ipov does not homogeneously cause growth	0.0901	−1.7157	0.0862*
B	igini does not homogeneously cause ipov	0.2756	−1.4210	0.1553
	ipov does not homogeneously cause igini	5.0227	6.1494	0.0000*
C	egini does not homogeneously cause ipov	0.2421	−1.4744	0.1404
	ipov does not homogeneously cause egini	8.0423	10.9647	0.0000*
D	lgini does not homogeneously cause ipov	0.1512	−1.6194	0.1054
	ipov does not homogeneously cause lgini	0.7292	−0.6977	0.4854
E	growth does not homogeneously cause npov	8.0113	10.9154	0.0000*
	npov does not homogeneously cause growth	1.3231	0.2494	0.8031
F	igini does not homogeneously cause npov	3.0636	3.0251	0.0025*
	npov does not homogeneously cause igini	1.1661	−0.0010	0.9992
G	egini does not homogeneously cause npov	4.2838	4.9709	0.0000*
	npov does not homogeneously cause egini	0.7290	−0.6980	0.4852
H	lgini does not homogeneously cause npov	3.3562	3.4918	0.0005*
	npov does not homogeneously cause lgini	3.6912	4.0259	0.0001*
I	igini does not homogeneously cause growth	3.8848	4.3346	0.0000*
	growth does not homogeneously cause igini	2.2748	1.7671	0.0772*
J	egini does not homogeneously cause growth	0.5440	−0.9929	0.3207
	growth does not homogeneously cause egini	4.6457	5.5481	0.0000*
K	lgini does not homogeneously cause growth	0.9526	−0.3415	0.7328
	growth does not homogeneously cause lgini	4.3252	5.0371	0.0000*

Note: *Rejection of the null hypothesis at least at the 10% level of significance.

Source: Author's calculations from Eviews 8.

Table 4. Long-run estimates.

	Dependent variable
Independent variable	ipov	npov	igini	egini	Lgini	growth
ipov			−0.14 (−7.50)***	0.07 (2.66)***		−0.13 (−4.49)***
npov					0.82 (2.72)**
igini		−0.59 (−4.31)***				0.32 (2.85)***
egini		1.41 (21.61)***
lgini		0.13 (2.89)**
growth	−1.1 (−3.49)***	−0.69 (−15.4)***	0.25 (2.78)***	−0.13 (12.09)***	−1.06 (−3.31)***

Notes: Values in parenthesis are t-statistics.

***Significant at 1% level. **Significant at 5% level.

Source: Author's calculations from Eviews 8.

Bourguignon, F, 2003. The poverty-growth-inequality triangle, in Poverty, inequality and growth. Proceedings of the AFD-EUDN Conference 2003, 69–111.

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Im, KS, Pesaran, MH & Shin, Y, 2003. Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53–74. doi: 10.1016/S0304-4076(03)00092-7

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Levin, A, Lin, CF & Chu, CSJ, 2002. Unit root test in panel data: Asymptotic and finite sample properties. Journal of Econometrics 108, 1–24. doi: 10.1016/S0304-4076(01)00098-7

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