The marginal propensity to earn and consume out of unearned income: Evidence using an unusually large cash grant reform
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.
|Date of creation:||18 Apr 2011|
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SALDRU Working Papers
8, Southern Africa Labour and Development Research Unit, University of Cape Town.
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