Triangle of Economic Activity, Inequality and Green Transition in South Africa

In this paper, we introduce an extended version of a demand-driven growth and climate model which was initially developed by Rezai et. al. (2018) and modified by Omer and Capaldo (2022). The model is extended to include the size distribution of two different households (the bottom 90% of the households vs. the top 10% of the households) with different consumption behaviors. In this version, we are also able to trace the external debt and emissions under different scenarios in more detail. Overall, these modifications allow us to study the dynamics of economic activity, fiscal and monetary policies, and debt, and their relationships with income and emission inequality patterns under different climate pathways and with different policy options for South Africa. We, therefore, analyze and discuss potential tradeoffs that may arise between expansionary policy, stricter policy, and free-riding cases, focusing on economic activity, external debt, and income and emission inequalities in South Africa