Working Paper: NBER ID: w13442
Authors: Cally Ardington; Anne Case; Victoria Hosegood
Abstract: The South African old-age social pension has been much studied by both researchers and policy makers, in part for the larger lessons that might be learned about behavioral responses to cash transfers in developing countries. In this paper, we quantify the labor supply responses of prime-aged individuals to changes in the presence of old-age pensioners in their households, using longitudinal data recently collected in northern KwaZulu-Natal. Our ability to compare households and individuals before and after pension receipt, and pension loss, allows us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. We find that large cash transfers to elderly South Africans lead to increased employment among prime-aged members of their households. Perhaps more importantly, pension receipt influences where this employment takes place. We find large, significant effects on labor migration among prime-aged members upon pension arrival. The pension's impact is attributable both to the increase in household resources it represents, which can be used to stake migrants until they become self-sufficient, and to the presence of pensioners who can care for small children, which allows prime-aged adults to look for work elsewhere.
Keywords: labor supply; social transfers; South Africa; pension; migration
JEL Codes: H31; J20; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| pension receipt (H55) | employment among prime-aged individuals (J69) |
| pension receipt (H55) | labor migration patterns (J61) |
| employment among prime-aged individuals (J69) | labor migration likelihood (J61) |
| loss of pension eligibility (H55) | labor migration likelihood (J61) |