Income distribution, persistent unemployment, and the classical growth cycle:evidence from South Africa

I formulate and calibrate a small 3D classical growth cycle model to explain the rise of income inequality, growth stagnation and the persistence of unemployment in South Africa between 1970-2005. This model exhibits interactions between economic growth, the employment rate, and the rate of profit. Simulation of the estimated model produces an underlying 59-year growth cycle for the South African economy, which is close to the one observed in the data. I find that the South African economy entered a phase of employment-enhancing growth in output around 2005, implying an estimated 37-year depression of the labour market.