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Household responses to the cessation of grant income: The case of South Africa's Old Age Pension

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  • Vimal Ranchhod

    (Southern Africa Labour and Development Research Unit, School of Economics, University of Cape Town)

Abstract

How do poor households respond to the cessation of cash transfers in developing countries? South Africa's generous social pension system results in most of the poor elderly being the primary 'breadwinner' in the household. We extract a longitudinal dataset using the rotating panel component of the nationally representative Quarterly Labour Force Surveys, and use fixed effects regression models to estimate the magnitude of changes in household composition and employment that coincide with the departure of a pensioner from the household. We find statistically significant changes in both of these outcome measures. Compositional changes include a decrease in the number of school going aged children, the number of teenagers, and the number of young adults; while the number of older adults increases. We also find significant increases in the number of employed prime aged adults and older adults. The combination of compositional changes and employment changes results in an increase in the mean proportion employed in all of the working age adult groups that we investigate. Overall, households respond by decreasing the number of dependents, increasing the number of potential caregivers, and increasing the proportion of adults engaged in income generating activities.

Suggested Citation

  • Vimal Ranchhod, 2017. "Household responses to the cessation of grant income: The case of South Africa's Old Age Pension," SALDRU Working Papers 213, Southern Africa Labour and Development Research Unit, University of Cape Town.
    • Handle: RePEc:ldr:wpaper:213
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    References listed on IDEAS

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