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Crowding out of private support to the elderly: Evidence from a demogrant in Mexico

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  • Juarez, Laura

Abstract

To examine whether private support dampens or reinforces the impact of redistributive policies, this paper estimates the effect of an exogenous increase in the income of the elderly, caused by a recent demogrant in Mexico, on the amount of private transfers they receive. My instrumental variables strategy overcomes the endogeneity of income that typically contaminates estimates and, unlike related studies that use natural or policy experiments in reduced-form estimations, it yields evidence of a positive bias. This suggests that an unobservable characteristic is positively correlated both with income and private transfer receipt and that treating income as exogenous could lead to an underestimation of the crowding out effect. In contrast, my preferred estimates are negative, significant and not far from minus one, implying an almost complete crowding out. My findings suggest that private transfers could neutralize the changes in the public transfers for the elderly.

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  • Juarez, Laura, 2009. "Crowding out of private support to the elderly: Evidence from a demogrant in Mexico," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 454-463, April.
  • Handle: RePEc:eee:pubeco:v:93:y:2009:i:3-4:p:454-463
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    Cited by:

    1. Jorge Alonso & Catalina Amuedo-Dorantes & Laura Juárez, 2016. "The Effect of Non-contributory Pensions on Saving in Mexico," IDB Publications (Working Papers) 7861, Inter-American Development Bank.
    2. Gutierrez Emilio & Juárez González Laura & Rubli Adrian, 2015. "The Effect of a Transfer Program for the Elderly in Mexico City on Co-Residing Children's School Enrollment," Working Papers 2015-09, Banco de México.
    3. Galiani, Sebastian & Gertler, Paul & Bando, Rosangela, 2016. "Non-contributory pensions," Labour Economics, Elsevier, vol. 38(C), pages 47-58.
    4. Laura Juarez & Tobias Pfutze, 2015. "The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 63(4), pages 685-713.
    5. Catalina Amuedo-Dorantes & Laura Juarez, 2015. "Old-Age Government Transfers and the Crowding Out of Private Gifts: The 70 and Above Program for the Rural Elderly in Mexico," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 782-802, January.
    6. Ikuho Kochi & Raul Alberto Ponce Rodriguez, 2010. "Do Remittances Crowd Out The Government¡¯S Redistributive Policy?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(4), pages 45-72, December.
    7. Kristopher Gerardi & Yuping Tsai, 2014. "The Effect of Social Entitlement Programmes on Private Transfers: New Evidence of Crowding Out," Economica, London School of Economics and Political Science, vol. 81(324), pages 721-746, October.
    8. Yoshito Takasaki, 2011. "Fraud and Poverty: Exploring Ex Ante Victim Data," Tsukuba Economics Working Papers 2011-002, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
    9. Niu, Chiyu & Arends-Kuenning, Mary, 2016. "No Country for Old Men: An Investment Motive for Downward Inter-generational Transfers in Rural China," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236033, Agricultural and Applied Economics Association.
    10. Edwin van Gameren & Durfari Velandia Naranjo, 2015. "Working and Caring: The Simultaneous Decision of Labor Force Participation and Informal Elderly and Child Support Activities in Mexico," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 52(2), pages 117-148, November.
    11. Charles Yuji Horioka & Emin Gahramanov & Aziz Hayat & Xueli Tang, 2016. "Why Do Children Take Care of Their Elderly Parents? Are the Japanese Any Different?," ISER Discussion Paper 0970, Institute of Social and Economic Research, Osaka University.
    12. Galiani, Sebastian & Gertler, Paul & Bando, Rosangela, 2016. "Non-contributory pensions," Labour Economics, Elsevier, vol. 38(C), pages 47-58.
    13. Hungerman, Daniel M., 2014. "Public goods, hidden income, and tax evasion: Some nonstandard results from the warm-glow model," Journal of Development Economics, Elsevier, vol. 109(C), pages 188-202.
    14. Jorge Alonso & Catalina Amuedo-Dorantes & Laura Juárez, 2016. "The Effect of Non-contributory Pensions on Saving in Mexico," IDB Publications (Working Papers) 95976, Inter-American Development Bank.
    15. Orraca Romano, Pedro Paulo, 2016. "Essays on development and labour economics for Mexico," Economics PhD Theses 0816, Department of Economics, University of Sussex.
    16. Corona, Francisco & Orraca, Pedro, 2016. "Remittances in Mexico and their unobserved components," DES - Working Papers. Statistics and Econometrics. WS 22674, Universidad Carlos III de Madrid. Departamento de Estadística.
    17. Pedro Orraca-Romano, 2015. "Does access to free health insurance crowd-out private transfers? Evidence from Mexico’s Seguro Popular," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 24(1), pages 1-34, December.
    18. Christine Ho, 2014. "Welfare-to-Work Reform and Intergenerational Support: Grandmothers’ Response to the 1996 PRWORA," Working Papers 12-2014, Singapore Management University, School of Economics.
    19. Tabea Herrmann & Attakrit Leckcivilize & Juliane Zenker, 2017. "The Impact of Cash Transfers on Child Outcomes in Rural Thailand: Evidence from a Social Pension Reform," PIER Discussion Papers 77, Puey Ungphakorn Institute for Economic Research, revised Dec 2017.
    20. Iwata, Shinichiro & Yukutake, Norifumi, 2013. "Housing subsidy or parental support: Crowding-out effect of mortgage tax deduction," MPRA Paper 46647, University Library of Munich, Germany.
    21. Catalina Amuedo-Dorantes & Laura Juarez, 2012. "Old-Age Government Transfers and the Crowding Out of Private Gifts: The 70 Plus Program for the Rural Elderly in Mexico," Working Papers 1205, Centro de Investigacion Economica, ITAM.
    22. Miguel Ángel Borrella Mas & Mariano Bosch Mossi & Marcello Sartarelli, 2016. "Non-Contributory Pensions Number-Gender Effects on Poverty and Household Decisions," Working Papers. Serie AD 2016-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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