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The marginal propensity to earn and consume out of unearned income: Evidence using an unusually large cash grant reform

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  • Bengtsson, Niklas

    ()
    (Uppsala Center for Labor Studies)

Abstract

We use a rapid introduction of an unconditional cash grant (child support) in South Africa to estimate the marginal propensity to consume and earn out of unearned income. We find that the marginal propensity to earn is about –0.3 and the marginal propensity to consume about 0.7. Nothing of the grant appears to be saved; if anything, households dissave against future grant payments. The marginal propensities estimated here are similar to those reported in comparable papers using US data. However, they stand in contrast to some results on conditional cash transfers in other developing countries.

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Bibliographic Info

Paper provided by Uppsala University, Department of Economics in its series Working Paper Series, Center for Labor Studies with number 2011:7.

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Length: 31 pages
Date of creation: 18 Apr 2011
Date of revision:
Handle: RePEc:hhs:uulswp:2011_007

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Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
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Web page: http://www.nek.uu.se/
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Related research

Keywords: Child support; Labor supply; Robust regression; Least absolute deviation; South Africa;

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  1. Jorge M. Aguero & Michael R. Carter & Ingrid Woolard, 2006. "The Impact of Unconditional Cash Transfers on Nutrition: The South African Child Support Grant," SALDRU Working Papers 8, Southern Africa Labour and Development Research Unit, University of Cape Town.
  2. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, April.
  3. Derek Yu, 2008. "The comparability of Income and Expenditure Surveys 1995, 2000 and 2005/2006," Working Papers 11/2008, Stellenbosch University, Department of Economics.
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