Energy, inequality and pro-poor growth in South Africa

Doctoral Thesis


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University of Cape Town

The effect of energy on inequality and poverty is not well understood and its role in growth-inequality-poverty nexus has not been adequately studied. A country's energy mix can playa significant role in economic growth and poverty alleviation. Policy authorities and donors increasingly lend support to modem energy provision, especially Rural Electrification (RE). This thesis investigates which energy types contribute to poverty alleviation in South Africa and through what mechanisms. Theory indicates that poverty alleviation comes by growth boosting and inequality reducing policies. As such, the investigation of the pro-poor effects of any policy or factor would naturally culminate in studying the effects on economic growth (or production) and income distribution. Theory suggests endogeneity on one hand between energy and GDP and on the other between GDP and inequality. This necessitates a system of equations rather than the traditional single equations approach. There are other (South Africa-specific) reasons why the inequality-development relationship and the role of energy should be investigated. First, South Africa has been under-researched due to lack of data. Recent data released by the Presidency of South Africa (AMPS Dataset) makes such analysis possible. Secondly, the Kuznets' inequalitydevelopment hypothesis can be tested with time series data rather than the cross-section analyses found in earlier literature. Third, energy's role in economic growth or production has been analysed with aggregate energy measures and aggregate GDP. This work argues that such an approach will mask energy type-specific and sector-specific details and undertakes a more disaggregated analysis. Fourth, the multiracial nature of South Africa requires sub-group decomposed inequality rather than national aggregates.

Includes bibliographical references.