Public Policy and Extended Families: Evidence from South Africa

47 Pages Posted: 5 May 2000 Last revised: 2 Apr 2001

See all articles by Marianne Bertrand

Marianne Bertrand

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Douglas L. Miller

University of California, Davis - Department of Economics

Sendhil Mullainathan

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2000

Abstract

Tightly knit extended families, in which people often give money to and get money from relatives, characterize many developing countries. These intra-family flows mean that public policies may affect a very different group of people than the one they target. To assess the empirical importance of these effects, we study a cash pension program in South Africa that targets the elderly. Focusing on three-generation households , we use the variation in pension receipt that comes from differences in the age of the elder(s) in the households. We find a sharp drop in the labor force participation of prime-age men in these households when elder women reach 60 years old or elder mean reach 65, the respective ages for pension eligibility. We also find that the drop in labor supply diminishes with family size, as the pension money is split over more people, and with educational attainment, as the pension money becomes less significant relative to outside earnings. Other findings suggest that power within the family might play an important role: (1) labor supply drops less when the pension is received by a man rather than by a woman; (2) middle aged men (those more likely to have control in the family) reduce labor supply more than younger men; and (3) female labor supply is unaffected. These last two findings also respectively suggest that the results are unlikely to be driven by increased human capital investment or by a need to stay home to care for the elderly. As a whole, this public policy seems to have had large effects on a group-prime age men living with the old-quite different from the one it originally targeted-elderly men and women.

Suggested Citation

Bertrand, Marianne and Miller, Douglas L. and Mullainathan, Sendhil, Public Policy and Extended Families: Evidence from South Africa (March 2000). NBER Working Paper No. w7594. Available at SSRN: https://ssrn.com/abstract=222248

Marianne Bertrand (Contact Author)

University of Chicago - Booth School of Business ( email )

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HOME PAGE: http://gsbwww.uchicago.edu/fac/marianne.bertrand/vita/cv_0604.pdf

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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Douglas L. Miller

University of California, Davis - Department of Economics ( email )

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Sendhil Mullainathan

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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