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Unintended labour supply effects of cash transfer programmes: Evidence from South Africa's old age pension

Author

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  • Abel, Martin

    (Public Policy at Harvard University)

Abstract
Employing South Africa's first nationally representative panel data set, I find that having old age pension recipients in the household adversely affects employment outcomes of prime-aged adults both by reducing the probability that the unemployed find work and by increasing the likelihood that the previously employed lose their job. These effects seems to operate through the income mechanism: an increase in pension resources increases the reservation wage and lowers labour force participation of prime-aged household members. By contrast I find evidence against the hypothesis that pensioners provide childcare which allows parents to work. Instead gaining a pensioner lowers the probability that mothers are employed. Adverse employment effects are found for salaried work and self-employment while the pension does not affect casual work. Impact estimates are larger in metropolitan areas which questions previous studies that find that pension resources finance labour migration. Results are robust to a series of novel robustness tests that exploit institutional features of the old age pension and disability grant.

Suggested Citation

  • Abel, Martin, 2013. "Unintended labour supply effects of cash transfer programmes: Evidence from South Africa's old age pension," SALDRU Working Papers 114, Southern Africa Labour and Development Research Unit, University of Cape Town.
    • Handle: RePEc:ldr:wpaper:114
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    References listed on IDEAS

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    Cited by:

    1. Vidhya Unnikrishnan & Kunal Sen, 2020. "Old-age pensions and female labour supply in India," WIDER Working Paper Series wp-2020-90, World Institute for Development Economic Research (UNU-WIDER).
    2. Kishan Shah & Federico Sturzenegger, 2023. "Search, Transport Costs, and Labor Markets in South Africa," CID Working Papers 142a, Center for International Development at Harvard University.
    3. Alessandro Tondini & Cally Ardington & Ingrid Woolard, 2017. "Public pensions and elderly informal employment: Evidence from a change in retirement age in South Africa," SALDRU Working Papers 206, Southern Africa Labour and Development Research Unit, University of Cape Town.
    4. Sinyolo, Sikhulumile & Mudhara, Maxwell & Wale, Edilegnaw, 2016. "To what extent does dependence on social grants affect smallholder farmers’ incentives to farm? Evidence from KwaZulu-Natal, South Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(2), pages 1-12.
    5. Sikhulumile Sinyolo & Maxwell Mudhara & Edilegnaw Wale, 2016. "The Impact of Social Grants on the Propensity and Level of Use of Inorganic Fertiliser among Smallholders in Kwazulu-Natal, South Africa," Agrekon, Taylor & Francis Journals, vol. 55(4), pages 436-457, October.
    6. Manea, Roxana Elena & Piraino, Patrizio & Viarengo, Martina, 2023. "Crime, inequality and subsidized housing: Evidence from South Africa," World Development, Elsevier, vol. 168(C).
    7. Unnikrishnan, Vidhya & Imai, Katsushi S., 2020. "Does the old-age pension scheme improve household welfare? Evidence from India," World Development, Elsevier, vol. 134(C).
    8. von Fintel, Dieter & Pienaar, Louw, 2016. "Small-Scale Farming and Food Security: The Enabling Role of Cash Transfers in South Africa's Former Homelands," IZA Discussion Papers 10377, Institute of Labor Economics (IZA).
    9. Kishan Shah, 2022. "Diagnosing South Africa’s High Unemployment and Low Informality," CID Working Papers 138a, Center for International Development at Harvard University.
    10. Salehi-Isfahani, Djavad & Mostafavi-Dehzooei, Mohammad H., 2018. "Cash transfers and labor supply: Evidence from a large-scale program in Iran," Journal of Development Economics, Elsevier, vol. 135(C), pages 349-367.
    11. von Fintel, Dieter & Pienaar, Louw, 2015. "Small-scale farming and hunger: the enabling role of social assistance programmes in South Africa’s former homelands," 2015 Conference, August 9-14, 2015, Milan, Italy 211916, International Association of Agricultural Economists.
    12. Baiyegunhi, L.J.S. & Majokweni, Z.P. & Ferrer, S.R.D., 2019. "Impact of outsourced agricultural extension program on smallholder farmers’ net farm income in Msinga, KwaZulu-Natal, South Africa," Technology in Society, Elsevier, vol. 57(C), pages 1-7.
    13. Jessica Standish-White & Arden Finn, 2015. "Unconditional cash transfers and children's educational outcomes: Evidence from the old-age pension programme in South Africa ," SALDRU Working Papers 147, Southern Africa Labour and Development Research Unit, University of Cape Town.

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