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Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa

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  • Victoria Hosegood
  • Anne Case
  • Cally Ardington

Abstract

We quantify the labor supply responses of prime-aged adults to the presence of pensioners in their households, using longitudinal data collected in South Africa. We compare households and individuals before and after pension receipt and pension loss, which allows us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. We find large cash transfers to the elderly lead to increased employment among prime-aged adults, which occurs primarily through labor migration. The pension's impact is attributable 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. (JEL H23, H55, I38, J22, O15)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 1 (2009)
Issue (Month): 1 (January)
Pages: 22-48

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Handle: RePEc:aea:aejapp:v:1:y:2009:i:1:p:22-48

Note: DOI: 10.1257/app.1.1.22
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  1. Anne Case & Angus Deaton, 1996. "Large Cash Transfers to the Elderly in South Africa," NBER Working Papers 5572, National Bureau of Economic Research, Inc.
  2. Phillippe G. Leite & Terry McKinley & Rafael Guerreiro Osório, 2006. "The Post-Apartheid Evolution of Earnings Inequality in South Africa, 1995-2004," Working Papers 32, International Policy Centre for Inclusive Growth.
  3. Stephan Klasen & Ingrid Woolard, 2001. "Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa," CESifo Working Paper Series 533, CESifo Group Munich.
  4. Doubell Chamberlain & Servaas van der Berg, 2002. "Earnings functions, labour market discrimination and quality of education in South Africa," Working Papers 02/2002, Stellenbosch University, Department of Economics.
  5. Cally Ardington & Anne Case & Victoria Hosegood, 2007. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," NBER Working Papers 13442, National Bureau of Economic Research, Inc.
  6. Eric V. Edmonds & Kristin Mammen & Douglas L. Miller, 2005. "Rearranging the Family?: Income Support and Elderly Living Arrangements in a Low-Income Country," Journal of Human Resources, University of Wisconsin Press, vol. 40(1).
  7. Esther Duflo, 2000. "Grandmothers and Granddaughters: Old Age Pension and Intra-household Allocation in South Africa," NBER Working Papers 8061, National Bureau of Economic Research, Inc.
  8. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  9. Marianne Bertrand & Sendhil Mullainathan & Douglas Miller, 2003. "Public Policy and Extended Families: Evidence from Pensions in South Africa," World Bank Economic Review, World Bank Group, World Bank Group, vol. 17(1), pages 27-50, June.
  10. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
  11. Posel, Dorrit & Fairburn, James A. & Lund, Frances, 2006. "Labour migration and households: A reconsideration of the effects of the social pension on labour supply in South Africa," Economic Modelling, Elsevier, Elsevier, vol. 23(5), pages 836-853, September.
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