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Social transfers and labor supply: Long run rvidence from South Africa

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  • Kacker, Kanishka

Abstract

How do large social transfers affect labor supply? This study analyses the South African pension program to answer this question. I exploit a major demand shock - the South African recession that began in 2008 - in a regression discontinuity design to �nd prime aged adult labor supply falls in response to pension arrival in the household only during the recession for sectors and types of workers affected by the recession. Post-recession, these workers witness an increase in demand and respond by increasing supply. Pension payments consequently have small and statistically insignificant effects on labor supply, a result that contrasts starkly with all existing studies. I argue these results stem from the combination of two forces. When labor demand is weak, the opportunity cost of leisure falls and workers demand more leisure. If a household member draws a pension, with leisure being a normal good, leisure demand increases further.

Suggested Citation

  • Kacker, Kanishka, 2019. "Social transfers and labor supply: Long run rvidence from South Africa," MPRA Paper 99044, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:99044
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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