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Abstract

The dispersion of racial incomes in South Africa has been declining since the mid 1970s. This has been accompanied by rising within-group inequality, especially amongst blacks, driven by growing unemployment. Consequently, there has been little improvement in aggregate indicators of inequality. In this study, it is argued that labour market changes resulting from the breakdown of apartheid in the workplace dominated shifts in the distribution of income during the 1970s and 1980s. Subsequently, the effects of liberalization have been more influential. Since the political transition in 1994, South Africa s government has sought to address the legacy of extreme racial income disparities within the framework of a broadly conservative macroeconomic strategy designed to stimulate private investment. However, economic growth has, to date, been insufficient to reverse declining formal-sector employment. Slow reform is likely to be more sustainable, but this means that inequality will probably remain a defining feature of South Africa for many years.

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