Resource rents, coercion, and local development: Evidence from post-apartheid South Africa

Abstract

We examine how the dismantling of coercive institutions associated with the end of apartheid in South Africa in 1994 affected the distribution of natural resource rents, and thereby impacted local economic development. Individual-level data from 1993 to 2015 reveal that relative real wages of Black workers increased at a significantly faster pace in the mining industry than in other sectors. Community-level data from the 1996 and 2011 population census reveal that this pattern helped explain the evolution of relative incomes of the former self-governing territories set aside for Black inhabitants. Using data from the 1996 census, we document large income gaps between communities located just-inside and just-outside the former self-governing territories set aside for Black inhabitants. Examining relative changes between 1996 and 2011, we find that spatial income convergence was considerably stronger among marginalized communities with higher initial exposure to resource rents. These results accord with bargaining theory in which the dismantling of coercive institutions improves the negotiating position of unionized workers in the mining industry.