Journal of Economic Perspectives
Journal of Economic Perspectives, 2009, Volume 3, Issue 4.
Economic Analysis of the Impact of
Policy Reforms on the South African Automobile Industry
Maylene Y. DAMOENSE*
School of Business and
Economics, Faculty of Business and Economics, Monash University- South Africa
Campus, 144 Peter Road, Ruimsig, Roodepoort, 1725, SOUTH AFRICA.
Frank W. AGBOLA
School, Faculty of Business and Law, The University of Newcastle - Australia,
1 University Drive, Callaghan NSW, 2308, AUSTRALIA.
After years of intense
protection, the South African automobile industry has undergone major policy
reforms. This paper investigates the impact of policy reforms on the welfare
of consumers, producers and society as a whole. The results of the simulation
analysis indicate that, following the removal of domestic content
requirements and reduction in tariffs, there has been significant reduction
in consumer welfare loss and societal deadweight loss in the automobile
industry, while tariff revenue to the South African government has
significantly decreased. The results demonstrate that further reduction in
tariffs on completely built-up units and completely knocked-down units
is likely to result in further reduction in efficiency loss, thus leading to
an improvement in the performance of South Africa’s automobile industry.
Classification: D61; F13; F14.
Keywords: Automobile Industry; Policy Reforms; Welfare
Gains and Losses; South Africa.
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