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Meyer, D.F., Muzindutsi, P.F., 10513086 - Meyer, Daniel Francois (Supervisor), 24754293 - Muzindutsi, Paul-Francois (Supervisor), Meyer, D.F., Prof, Muzindutsi, P.F., Dr |
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MCom (Economics), North-West University, Vaal Triangle Campus, 2018 Maintaining the growth and sustainability of jobs in a changing global market environment is crucial for establishing an enabling social and economic atmosphere for economic development, growth and wellbeing. Economic theory shows that the trade environment is an important determinant of the domestic economy’s industry productivity, and growth. Factors constituting the trade environment such as trade openness, the exchange rate and foreign direct investment (FDI), may contribute to job creation especially across tradable and non-tradable sectors. Nevertheless, the effect of these factors on job patterns within a fast changing and highly integrated global market economy remains a point of debate. Empirical declarations have presented mixed findings on the subject matter and thus no single empirical consensus has been presented. Meanwhile, economic theory argues that potential effects of the aforementioned trade factors on a country’s job patterns varies according to the orientation of jobs in either tradable or non-tradable sectors. This study examined the effects of trade openness, the real effective exchange rate and FDI on job creation in South Africa’s grouped tradable and grouped non-tradable sectors, as well as the individual tradable and non-tradable private sectors. It thus ascertained the long-run and short-run relationships between South Africa’s tradable and non-tradable jobs against the country’s trade openness, the real effective exchange rate and net-FDI from 1995 to 2016. The study also established the causal direction between trade openness and employment in the tradable and nontradable sectors, the real effective exchange rate and employment in the tradable and non-tradable sectors, as well as FDI and employment in the tradable and non-tradable sectors. Results of employment in the grouped tradable sector and the grouped non-tradable sector were compared with the individual tradable and non-tradable private sectors/and or industries. The study employed various econometric statistical models inclusive of descriptive analyses, Panel Autoregressive Distributive Lag model (ARDL), the standard ARDL bounds test to cointegration, Error Correction Model and Toda-Yamamoto Granger causality test. The study also made use of a quantitative research methodology and included time series macro-economic variables such as non-agricultural employment in South Africa’s selected economic sectors (manufacturing, mining, wholesale and retail trade, finance and construction), trade openness, the real effective exchange rate and net-FDI from 1995 to 2016. Employment in the grouped tradable sector revealed a statistically significant and positive longrun relationship with trade openness. The long-run effects of both the real effective exchange rate and net-FDI on employment was not significant. The short-run findings exhibited non-significant relationships between trade openness, the real effective exchange rate and net-FDI with employment in the grouped tradable sector. Moreover, results of employment in individual tradable sectors established no long-run and short-run relationships between employment trade openness, the real effective exchange rate and net-FDI in the mining tradable sector. Employment in the manufacturing tradable sector presented significant and negative long-run relationships with trade openness, the real effective exchange rate and net-FDI. Meanwhile, the short-run findings exhibited a significant and positive relationship between employment in the manufacturing tradable sector with trade openness, and significantly negative for net-FDI. Results of the shortrun relationship between employment in the manufacturing tradable sector with the real effective exchange rate were not significant. Results of the Toda-Yamamoto Granger non-Causality results showed evidence of a bidirectional causal relationship between South Africa’s trade openness and employment within the manufacturing tradable sector. Furthermore, evidence of a significant and positive long-run relationship was revealed between employment in the grouped non-tradable sector with both South Africa’s trade openness and the real effective exchange rate. Employment in the grouped non-tradable sector exhibited no longrun relationship with net-FDI. The short-run results established a significant relationship between employment in the grouped non-tradable sector and the real effective exchange rate. Whereas, the short-run relationship between employment in the grouped non-tradable sector with trade openness and net-FDI was not significant. Findings of employment in the individual non-tradable sectors such the wholesale and retail trade, finance and construction sector, revealed positive and significant long-run relationships between employment in all the individual non-tradable private sectors (wholesale and retail trade, finance and construction) with trade openness and the real effective exchange rate. Nevertheless, there was a negative and significant long-run relationship between employment in the wholesale and retail trade sector with net-FDI, while the long-run relationships between employment in the nontradable individual finance sector and employment in the individual non-tradable construction sector exhibited positive relationships with net-FDI. The short-run findings exhibited insignificant short-run relationships between employment in the wholesale and retail non-tradable sector with trade openness, the real effective exchange and net-FDI. Results revealed a positive short-run relationship between employment in the finance non-tradable sector and trade openness, and negative with the real effective exchange rate. Findings established in the Toda-Yamamoto granger non-causality test further revealed a unidirectional causal relationship from South Africa’s real effective exchange rate and employment in the finance sector. Lastly, employment in the construction non-tradable sector revealed a positive short-run relationship with trade openness, while no significant short-run relationship was revealed between employment in the construction sector with the real effective exchange rate and net-FDI. Conclusively, in light of the tradable and non-tradable grouped sectors, increased trade openness is revealed to have a positive effect on employment in both grouped sectors in the long-run. Such long-run positive effects are only maintained by all non-tradable individual sectors when each private sector is distinctively tested for cointegration. South Africa’s individual tradable sectors however, do not capture the positive employment effects of trade openness in the long-run. The positive employment effects of trade openness are only witnessed in the manufacturing sector’s short-run period, nevertheless, these conditions are not able to be translated towards the long-run. Evenly, no cointegration was found in the mining sector. These findings thus conclusively suggest that South Africa’s increased external exposure to the global market (trade openness) largely favours employment in the grouped non-tradable sector and its distinctive private sectors, as opposed to the tradable sector. Also, with both factors having a negative effect on employment in the long-run, the empirical nature of South Africa’s exchange rate and FDI patterns do not significantly affect employment in the tradable sector, while employment in the mining sector does not respond to changes in the former and latter economic factors having not shown any form of cointegration. The manufacturing sector exhibited a negative and significant relationship. Despite FDI being non-significant, a positive long-run effect on employment was revealed for the real exchange rate and FDI in the grouped non-tradable sector, whilst it was also positive but significant for the finance and construction sectors. Only employment in the wholesale and retail trade sector displayed a negative FDI relationship, but maintained a positive employment and real exchange rate interrelatedness. These results highlight the major differences between the tradable sector and non-tradable sector, as well as their distinct private sectors. The responsiveness of employment in each sector towards trade openness, the real exchange rate and FDI underlining South Africa’s trade environment, has shown distinct patterns depending on whether it is tradable or non-tradable. The employment benefits obtained by one sector may conversely imply a negative effect on the other sector, being tradable or non-tradable. Findings also established that trade openness and the real effective exchange rate hold the most impact on employment or job patterns relative to FDI. This may be led by FDI’s relatively low growth trajectories over the years. Masters |
