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Unintended labour supply effects of cash transfer programmes: Evidence from South Africa's old age pension


  • Abel, Martin

    () (Public Policy at Harvard University)


Employing South Africa's first nationally representative panel data set, I find that having old age pension recipients in the household adversely affects employment outcomes of prime-aged adults both by reducing the probability that the unemployed find work and by increasing the likelihood that the previously employed lose their job. These effects seems to operate through the income mechanism: an increase in pension resources increases the reservation wage and lowers labour force participation of prime-aged household members. By contrast I find evidence against the hypothesis that pensioners provide childcare which allows parents to work. Instead gaining a pensioner lowers the probability that mothers are employed. Adverse employment effects are found for salaried work and self-employment while the pension does not affect casual work. Impact estimates are larger in metropolitan areas which questions previous studies that find that pension resources finance labour migration. Results are robust to a series of novel robustness tests that exploit institutional features of the old age pension and disability grant.

Suggested Citation

  • Abel, Martin, 2013. "Unintended labour supply effects of cash transfer programmes: Evidence from South Africa's old age pension," SALDRU Working Papers 114, Southern Africa Labour and Development Research Unit, University of Cape Town.
  • Handle: RePEc:ldr:wpaper:114

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    References listed on IDEAS

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    Cited by:

    1. Alessandro Tondini & Cally Ardington & Ingrid Woolard, 2017. "Public pensions and elderly informal employment: Evidence from a change in retirement age in South Africa," SALDRU Working Papers 206, Southern Africa Labour and Development Research Unit, University of Cape Town.
    2. Sinyolo, Sikhulumile & Mudhara, Maxwell & Wale, Edilegnaw, 2016. "To what extent does dependence on social grants affect smallholder farmers’ incentives to farm? Evidence from KwaZulu-Natal, South Africa," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(2), June.
    3. von Fintel, Dieter & Pienaar, Louw, 2015. "Small-scale farming and hunger: the enabling role of social assistance programmes in South Africa’s former homelands," 2015 Conference, August 9-14, 2015, Milan, Italy 211916, International Association of Agricultural Economists.
    4. Jessica Standish-White & Arden Finn, 2015. "Unconditional cash transfers and children's educational outcomes: Evidence from the old-age pension programme in South Africa ," SALDRU Working Papers 147, Southern Africa Labour and Development Research Unit, University of Cape Town.


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