Trade liberalisation and wage inequality within the regions of South Africa

Molokoane, Tshepo Norman

Trade liberalisation and wage inequality within the regions of South Africa

Thesis / Dissertation

2026

Publisher

University of Cape Town

Department

School of Economics

Faculty

Faculty of Commerce

Abstract

This study examines the relationship between trade liberalisation and wage inequality in South Africa's manufacturing sector over the period 1998-2017, using the Stolper-Samuelson theorem as a framework. In this study, we use the autoregressive distributed lag (ARDL) bounds testing technique to estimate the long-run relationship between relative prices, trade openness, labour productivity, human capital, regions, and skill premium. Our main findings show that trade liberalisation has contributed to an increase in wage inequality, predominantly through relative prices, in both the short and long run. We also find that trade openness explains the modest decline in wage inequality, particularly within the coastal region. Additionally, we observe a negative relationship between labour productivity and skill premium across both time frames. The results further reveal that human capital negatively impacts the skill premium but is statistically insignificant in the inland and inland core regions. Regional wage disparities significantly and positively influence the skill premium in the coastal region in the long run, and in the inland region in both the short and long run.