Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa

44 Pages Posted: 28 Sep 2007 Last revised: 25 Sep 2022

See all articles by Cally Ardington

Cally Ardington

University of Cape Town (UCT)

Anne Case

Princeton University - Research Program in Development Studies; National Bureau of Economic Research (NBER)

Victoria Hosegood

London School of Hygiene & Tropical Medicine

Date Written: September 2007

Abstract

The South African old-age social pension has been much studied by both researchers and policy makers, in part for the larger lessons that might be learned about behavioral responses to cash transfers in developing countries. In this paper, we quantify the labor supply responses of prime-aged individuals to changes in the presence of old-age pensioners in their households, using longitudinal data recently collected in northern KwaZulu-Natal. Our ability to compare households and individuals before and after pension receipt, and pension loss, allows us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. We find that large cash transfers to elderly South Africans lead to increased employment among prime-aged members of their households. Perhaps more importantly, pension receipt influences where this employment takes place. We find large, significant effects on labor migration among prime-aged members upon pension arrival. The pension's impact is attributable both to the increase in household resources it represents, which can be used to stake migrants until they become self-sufficient, and to the presence of pensioners who can care for small children, which allows prime-aged adults to look for work elsewhere.

Suggested Citation

Ardington, Cally and Case, Anne and Hosegood, Victoria, Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa (September 2007). NBER Working Paper No. w13442, Available at SSRN: https://ssrn.com/abstract=1017765

Cally Ardington

University of Cape Town (UCT) ( email )

South African Labour & Development Research Unit
Rondebosch 7701
South Africa

Anne Case (Contact Author)

Princeton University - Research Program in Development Studies ( email )

Woodrow Wilson School
345 Wallace Hall
Princeton, NJ 08544
United States
609-258-2177 (Phone)
609-258-5974 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Victoria Hosegood

London School of Hygiene & Tropical Medicine ( email )

Keppel Street
London, WC1E 7HT
United Kingdom

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