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Authors: CHAMA CHIPETA.
DOI: 10.24193/subbnegotia.2022.2.03
Article history: Received 8 Ferbruary 2022; Revised 3 May 2022; Accepted 15 May 2022;
Available online 30 June 2022; Available print 30 August 2022.
pp. 41-70
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Mounting assertions of the increased benefits of foreign trade integration, in terms of increased wages and labour, as well as factor productivity and resource reallocations, are accompanied by subsequent concerns of coexisting job destruction, particularly for countries with evidently rising unemployment and poverty levels. Such is the case for a post-apartheid South African economy, ravaged by persistently high unemployment rates amid increased trade liberalisation. In drawing meaningful inherences, this study examined the effects of South Africa’s trade openness, the real effective exchange rate and foreign direct investment (FDI) on job creation or employment in selected non-tradable sectors. A quantitative approach was used, with the aforementioned trade-related factors as explanatory variables. Employment in the non-tradable sector’s construction, finance, and the wholesale and retail trade sector served as dependent variables. A quarterly dataset from 1995Q1 to 2021Q1 was employed. While the standard Autoregressive Distributed Lag (ARDL) model was used to gauge short-run and long-run relationships. Further econometric methods such as the correlations analysis were conducted to obtain additional understanding of the nature of the set variables. Findings showed that trade liberalisation effects induce varying implications on employment in the considered non-tradable sectors, perhaps due to idiosyncratic characteristics in the nature and operational structure of each sector. Trade openness was shown to have exhibited significant long-run implications on job creation in all the sectors, whereas the parameters of the rest of the explanatory series were not significant in the long-run. Results further showcased mixed short-run effects of trade factors on employment in all sectors, with significant parameters for the real effective exchange rate and trade openness with employment in the construction sector. Including significant short-run relationships for the real effective exchange rate with employment in the finance sector. Significant parameters for employment in the wholesale and retail trade sector with FDI and the real effective exchange rate were established. Further inferences were made in expounding on the established dynamics.
Keywords: job creation, employment, non-tradable sector, real exchange rate, and trade openness.
JEL Classification: E24, F16, F31, O49
