This dissertation presents new evidence on the causes of persistently high unemployment
in South Africa. South Africa has one of the highest unemployment rates
in the world. Nearly one in four South African labor force participants are unemployed.
I use three new sources of data to examine how individuals and households
alter their labor market behavior to cope with negative shocks. My findings will
inform policy aimed at reducing unemployment and inequality in South Africa. This
volume consists of three distinct essays: the first two focus on the contribution of
HIV/AIDS to unemployment and the third focuses on the role of the intra-household
transfers in keeping unemployment high.
The first chapter examines the labor market impact of the largest AIDS treatment
program in the world which enrolled over 500,000 patients between 2004 and 2008. I
use geographic and temporal variation in the program rollout to identify the causal
impact of the program. I find that for men the likelihood of labor force participation
and employment both rise after an AIDS treatment clinic opens less than 15 miles
away, but there are no discernable effects for women. Over time, as a greater proportion
of the population begins receiving treatment, labor force participation falls and
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employment rises for both men and women. These results demonstrate that AIDS
treatment may be undersupplied if the positive employment effects are not taken
into account when designing health policy.
The second chapter, co-authored with James A. Levinsohn, Olive Shisana and
Khangelani Zuma, estimates the causal effect of HIV status on employment outcomes
in South Africa using two econometric methods based on the propensity score.
Because individuals with HIV are more likely to fall into poverty, and the poor may
be at higher risk of contracting HIV, simple estimates of the effect of HIV status
on economic outcomes will tend to be biased. We rely on rich data on sexual behavior
and knowledge of HIV from a large national household-based survey, which
included HIV testing, to control for systematic differences between HIV-positive and
HIV-negative individuals. This paper provides the first nationally representative estimates
of the impact of HIV status on labor market outcomes for southern Africa.
We find that being HIV-positive is associated with a seven percentage point increase
in the likelihood of being unemployed. South Africans with less than a high school
education are close to 11 percentage points more likely to be unemployed if they
are HIV-positive. Despite high unemployment rates, being HIV-positive confers a
disadvantage and reinforces existing inequalities in South Africa.
The third chapter examines whether a negative shock to household employment
and the corresponding fall in the reservation wage leads unemployed household members
to resume job search or obtain employment. Using nationally representative
panel data, I find that men are more likely to increase search activity following a
negative employment shock to the household, but only more likely to obtain em-
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ployment 12-18 months after a negative shock or when the household experiences
two consecutive shocks. There is no change in labor force participation for women,
however, they are more likely to obtain employment 12-18 months after a negative
shock. My results represent suggestive evidence that structural and frictional factors
constrain household responses to negative shocks.