Understanding the effects of racial classification in Apartheid South Africa

The apartheid era began in 1948 in South Africa, and was implemented by passing several racially discriminatory laws. Most of the key legislative changes were introduced between 1949 and 1953. The cornerstone of this racially stratified legal system was the Population Registration Act of 1950, which required that all South Africans needed to be registered and assigned to an official racial category. We study the effect of racial classification in the context of these legislative reforms, by estimating the causal effect of being classified as White, relative to being classified as Coloured, on labour market outcomes. For identification we exploit a policy change that privileged ancestry over appearance in the process of racial classification for those born after 1951. Using census data from 1980, 1991, and 1996, we find a discontinuity in racial shares for cohorts born after 1951. Our preferred estimates indicate that being classified as White resulted in a more than fourfold increase in income for men. This corresponds to over 90% of the difference in mean incomes between men in the two population groups. Our findings for women are inconclusive. •We estimate the causal effect of racial classification on labour market outcomes in Apartheid South Africa.•We use a change in the criteria by which people were racially classified for identification.•Our estimates for education are extremely large, for both men and women.•Our estimate for earnings for men are also large. Our estimates for women are inconclusive.•These estimate combine the effects of both pre-market and labour market discrimination.