Biased Policies, Agriculture and Income Distribution in South Africa: A Social Accounting Matrix Approach

Abstract

In this study a Social Accounting Matrix approach is used to analyse the effects of changes in agricultural policies on income distribution. Increasing final demand for agricultural products, and a reduction in agricultural price support, will produce greater proportional benefits for poorer households, although these benefits are small. A 6% reduction in agricultural price supports results in a 7% decline in agricultural prices, but the intersectoral effects are concentrated; hence the decline in price supports has a relatively limited impact on the structure of relative commodity prices beyond the food System. The benefits of an increase in agricultural wages decline with household incomes, with the higher wages having a minimal effect on paces. Policy simulations indicate the extent to which agricultural policy reforms can have a positive effect on income distribution in South Africa.