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Working Paper 106 - Does Human Capital Protect Workers against Exogenous Shocks? South Africa in the 2008 - 2009 Crisis

06-May-2010

Like the rest of Africa, South Africa has taken a heavy toll from the global financial and economic crisis of 2008 and 2009 (African Development Bank 2009). By the fourth quarter of 2008, the South African economy was in recession (Figure 1). This translated into adverse outcomes for the labor market which was already characterized by unemployment rates hovering around 25 percent.

We use unique Labor Force Survey (LFS) data covering a period spanning before and during the crisis to investigate the role of human capital, embodied in education and experience, as a buffer against external shocks. The contribution is novel in two respects. First, because of the unparalleled quality and frequency of the data, it quantifies the effects of the crisis for individual labor market participants in South Africa. To the best of our knowledge, we are the first to conduct this exercise. Second, by focusing on the crisis period, it deepens the understanding of South African labor market dynamics and transition over the business cycle.

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