The Apartheid system in South Africa came to a close recently and a new majority government is ruling. This government represents a poor majority of the population, and there is great pressure on them to redistribute wealth in favor of their supporters, the poor.
This thesis consists of three essays. The first estimates the distribution of personal wealth in South Africa according to the estate multiplier method. It is found that the distribution is skewed, but not more so than in countries for which similar studies have been done. The distribution of wealth is, however, distributed along racial lines, which makes the distribution politically unacceptable. The white minority which constitutes 16 percent of the total population, owns more than 90 percent of all personal wealth.
The second part studies the major political role players in South Africa and their behavior in the Constitution making process that is still underway. A model of optimal behavior by political groups is constructed, and it is found that the majority government in South Africa will act rationally if they opt for majority rule in a unitary state. That is exactly what the ANC-government has been doing since the beginning of the negotiation process. The behavior of the other groups is also found to be rational and predictable within the context of the model.
The third part of the thesis consists of a computable general equilibrium model with overlapping generations. Three groups are modeled--a rich group, a middle class, and a poor group. A government implements three possible redistributive policy measures. First, the tax on the capital income which accrues to the two more affluent groups, is increased; second, an estate tax is implemented, and third, the sales tax is increased. The first policy measure improves upon the wealth distribution, but is inefficient. The second policy, which is implemented according to the lifetime endowment view of tax equity, generally improves upon the wealth distribution, and is relatively efficient under certain assumptions. The third policy may be very harmful to the poor.