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The marginal propensity to earn, consume and save out of unearned income in South Africa


  • Bengtsson, Niklas

    () (Department of Economics)


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 a permanent change in unearned income. We find that the marginal propensity to earn is about to -0.25 for single-adult households, and somewhat lower for households with more than one adult. A very small fraction of the grant is saved. All in all, the marginal propensities estimated here are all 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.

Suggested Citation

  • Bengtsson, Niklas, 2010. "The marginal propensity to earn, consume and save out of unearned income in South Africa," Working Paper Series 2010:4, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2010_004

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    Cited by:

    1. Frederick C.v.N. Fourie, 2011. "The South African unemployment debate: three worlds, three discourses?," SALDRU Working Papers 63, Southern Africa Labour and Development Research Unit, University of Cape Town.

    More about this item


    Social policy; Poverty reduction; Labor Supply; Earnings; Savings; Expenditure; Stone-Geary utility;

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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