What are the effects of expanding a social pension program on extreme poverty and labor supply ? evidence from Mexico's pension program for the elderly

In 2013, Mexico's Social Pension Program for the Elderly was expanded by changing its eligibility threshold from age 70 to age 65. Using pooled cross-sectional data from Mexico's National Household Income and Expenditure Survey, the exogenous variation around eligibility age was exploited to uncover the causal effects of this expansion on extreme poverty and labor supply of the newly eligible population, and to explore potential transmission mechanisms. Applying quasi-experimental methods, results show that the expansion of Mexico's Social Pension Program for the Elderly not only reduced the probability of the elderly being extreme poor, but it also reduced the extreme poverty gap, and the extreme poverty severity indexes of the elderly population. These effects on extreme poverty are generalizable to all individuals of the treated household. The results suggest that the expansion of the Social Pension Program for the Elderly did not have short-term effects on the labor force participation of the elderly. Accordingly, the analysis does not find that the program reduced labor income. In contrast with other impact evaluations of similar programs, the analysis does not find that the expansion of Mexico's program had a crowding out effect on domestic or international private transfers to the elderly.