Essays on economic growth, education, and the distribution of income: A structural analysis for the case of South Africa

ince the fall of the Apartheid regime in South Africa in 1994, the democratically elected post-Apartheid governments have engaged in social and economic reforms aimed at improving the welfare of millions of the left outs during that regime, and at enhancing economic growth. Among these reforms, the most important have consisted of achieving structural transformation of the South African economy through technological advancements, improving skills by investing massively in human capital through education and training, reducing income inequality across racial groups through access to programs that facilitate the acquisition of skills by the left outs of the Apartheid regime rather than through massive income redistribution, liberalizing the labor markets and the formation of labor unions, privatizing statal and para-statal corporations and abolishing monopolies in public services, liberalizing trade and capital movements, promoting new investment through tax incentives, promoting private initiative, reducing or at least freezing government expenditures, reducing poverty, and so on.;In this dissertation, I analyze the relationship between growth and some aspects of the economy targeted by the aforementioned reforms through two separate essays. In the first essay (Essay 1), I analyze the growth and welfare effects of public spending on education in post-Apartheid South Africa while in the second essay (Essay 2) I investigate the dynamics of income inequality, poverty, and growth in the post-Apartheid South Africa.;Starting with Essay 1, since the abolition of its Apartheid regime in 1994, South Africa has launched a massive program of education and training, which has been financed through resources representing annually on average 21% of the national budget, or 7% of GDP. Today, the GDP share of public spending on education is 1.3 times the average of industrialized countries (5.4%) and almost twice that of developing countries (3.9%).;In this essay, I simulate fiscal policy experiments to analyze the growth and welfare effects of a reduction in or an elimination of spending on education in a model of endogenous growth with human capital accumulation and policies for the Post Apartheid South African economy. The first and second experiments consist of reducing the GDP share of educational spending to the averages of industrialized and developing countries, respectively; while the third experiment consists of eliminating government spending on the educational sector (a 100% tax reduction).;The results of the simulations demonstrate that a reduction in or an elimination of educational spending reduces the long run rates as well as the transition rates of growth, in per capita GDP, the wages of skilled workers, and overall welfare. The effects on the other variables in the economy (physical capital, human capital, labor, consumption, and the interest rate) vary across experiments. However, these growth and welfare effects are small.;Turning to Essay 2, I construct a model of growth with heterogeneity in asset holdings and skills and calibrate it to the Post-Apartheid South African economy in order to analyze the dynamics of income distribution, income inequality, poverty, and growth. I find that growth is achieved at all levels of incomes and poverty is totally eliminated by the end of the process, which lasts 73 years (from 1993 to 2065). Furthermore, the economy achieves the overall convergence of incomes to the income of the average consumer in the distribution. Indeed, poor consumers improve their relative positions of in the distribution of wealth as well as in that of income while rich consumers worsen theirs. Next, I combine the results of the heterogeneous model with the microeconomic data (the South Africa's 1996 October Household Survey) to estimate the distribution of income, and to analyze thoroughly the interaction between growth, income inequality, and poverty. I find that a one percent increase in the rate of growth of income causes on average poverty to drop by 3.7%, using the...