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Social Transfer Benefits and Retirement Decisions: Evidence from South Africa

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  • Steve Muchiri
  • John Garen

Abstract

Population aging poses a new challenge to the fiscal sustainability of social security programs around the globe. As life expectancy increases, among other reasons, many governments in developed countries have begun to reform key features of their programs, such as increasing the eligibility age for access to social benefits. However, as in the case of South Africa, some opt to decrease the eligibility age for access to such pension benefits. The South African old age pension, which is one of the most expansive cash transfers in developing countries, puts a significant monthly cash transfer in the hands of its recipients. This cash transfer is conditioned on age and a means test that is very generous to most South Africans. In this paper, we seek to understand the impact of such an increase in non‐labour income on the labour force participation of older men by exploiting a phased‐in reduction in pension eligibility age. We estimate that, at the median predicted market wage, pension age‐eligibility reduces the probability of labour force participation by approximately 9.85% points for single males and 15.45% points for married males.

Suggested Citation

  • Steve Muchiri & John Garen, 2018. "Social Transfer Benefits and Retirement Decisions: Evidence from South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 86(1), pages 23-52, March.
  • Handle: RePEc:bla:sajeco:v:86:y:2018:i:1:p:23-52
    DOI: 10.1111/saje.12180
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    Cited by:

    1. Steve Muchiri & Sun‐Ki Choi, 2021. "Evaluating the significance of cash transfers on household consumption," African Development Review, African Development Bank, vol. 33(4), pages 662-673, December.
    2. Julia Włodarczyk & Indranarain Ramlall & Jan Acedański, 2020. "Macroeconomic Effects of an Ageing Population in Mauritius," South African Journal of Economics, Economic Society of South Africa, vol. 88(4), pages 551-574, December.
    3. Muhammad Shehzad Hanif & Muhammad Imran Hanif & Yunfei Shao, 2018. "Contemplating the Antecedents of a Sustainable Work Life in an Emerging Economy: Lessons from Early Retirees in the ICT Sector of Pakistan," Sustainability, MDPI, vol. 10(12), pages 1-21, December.

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