Public Policy and Extended Families: Evidence from South Africa

54 Pages Posted: 19 Sep 2001  

Marianne Bertrand

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

Sendhil Mullainathan

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

Douglas L. Miller

University of California, Davis - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: March 27, 2001

Abstract

How are resources allocated within extended families in developing countries? To investigate this question, we use a unique social experiment: the South African pension program. Under that program, the elderly receive a cash transfer that represents roughly twice the per capita African income. We ask how this transfer affects the labor supply of working-age individuals living with these elderly. We find a sharp drop in the working hours of the prime-age individuals in these households when elder women reach 60 years old or elder men reach 65, the respective ages for pension eligibility. We also find that the drop in labor supply is much larger when the pensioner is a woman, suggesting an imperfect pooling of resources. The allocation of resources among prime-age individuals depends strongly on their absolute age and sex as well as on their relative age. The oldest son in the household reduces his working hours more than any other prime-age household member. The large labor supply response we observe raises important issues for the design of social policy programs in developing countries and also leads us to be wary of any model of intra-household allocation of resources that does not fully account for the endogeneity of earned income.

Keywords: Families, Pension, Labor Supply, South Africa

JEL Classification: D1, H55, I38, J22, O10

Suggested Citation

Bertrand, Marianne and Mullainathan, Sendhil and Miller, Douglas L., Public Policy and Extended Families: Evidence from South Africa (March 27, 2001). MIT Department of Economics Working Paper No. 01-31. Available at SSRN: https://ssrn.com/abstract=281397 or http://dx.doi.org/10.2139/ssrn.281397

Marianne Bertrand

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-5943 (Phone)

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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-0341 (Phone)
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Centre for Economic Policy Research (CEPR)

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London, EC1V 3PZ
United Kingdom

Sendhil Mullainathan (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-496-2720 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1473 (Phone)
617-876-2742 (Fax)

Douglas L. Miller

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

One Shields Drive
Davis, CA 95616-8578
United States
530-752-8490 (Phone)

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