Working Paper

2015-05-28

CSSR and SALDRU

University of Cape Town

The aim of this paper is to further improve the understanding of income generation among the formerly underprivileged and often impoverished majority of households in South Africa. This study uses household survey data for the analysis of households' integration into the South African core economy. The emerging picture of household income generation is one that disputes common perceptions of the multitude of means by which African households are assumed to generate their income. The majority of households rely to a large extent on one income source and one income earner. Verbal contextual information and descriptive statistics justify the estimation of separate multinomial logit models for urban and non-urban households with the probabilities for having either of five main income source categories as outcomes. Results from the regression analyses indicate that prominent covariates of low core-economy integration are earners who are female, either old or young earners of working-age, who have low levels of education. A non-urban household's location in either a former 'homeland' or in an agriculturally or commercially developed area yields disparate implications for the main income source probabilities. The study also finds associations between main income sources and households' demographic compositions which are compatible with findings in previous research on both private transfer behaviour and endogenous household formation in South Africa.

The author notes that while any defects or shortcomings in this work are entirely his own responsibility, thanks goes to Arne Bigsten, Lennart Flood, Stefan Klasen, Murray Leibbrandt, Laura Poswell, Donald Storrie, and Ali Tasiran for valuable comments to previous versions of this work. The financial provision for this research by the Swedish International Development Cooperation Agency (Sida) is thankfully acknowledged. The author would also like to thank the Centre for Social Science Research at the University of Cape Town for hosting the author while conducting the research for this work.