The Effect of Non-Contributory Pensions on Labour Supply and Private Income Transfers: Evidence from Singapore

70 Pages Posted: 22 Nov 2017 Last revised: 10 May 2018

Yanying Chen

School of Economics, Singapore Management University

Yi Jin Tan

School of Economics, Singapore Management University

Date Written: November 20, 2017

Abstract

Non-contributory pensions are becoming increasingly prevalent worldwide. As their effects are likely to be context-dependent, evaluating their effects in a wide range of settings is important for establishing the external validity of the non-contributory pension literature. We use a new monthly panel dataset and a difference-in-differences strategy to study the effect of a new non-contributory pension in Singapore (the Silver Support Scheme, or SSS) on labour supply, work expectations, private cash transfers, and expenditure, one year after its implementation. We find no evidence that receiving SSS payouts led to a fall in labour supply, work expectations, or the receipt of private cash transfers in the first year after SSS implementation – our estimated effects for these outcomes are statistically insignificant, and are either negative but close to zero, or positive. Our point estimates of the effects of receiving SSS payouts on expenditure are positive but too imprecise to allow us to make any definitive conclusions. Lastly, we do not find evidence of anticipatory effects among younger individuals who are not age-eligible for payouts yet. These results, when coupled with our finding in a companion paper that the SSS improved recipients’ subjective well-being (Chen & Tan, 2017), suggest that the SSS was successful in improving recipients’ welfare without substantial crowding out of private transfers or changes in labour market behaviour of current and future SSS beneficiaries.

Keywords: non-contributory pensions, labour supply, private income transfers, crowding out

JEL Classification: H3, H4, I3, J2

Suggested Citation

Chen, Yanying and Tan, Yi Jin, The Effect of Non-Contributory Pensions on Labour Supply and Private Income Transfers: Evidence from Singapore (November 20, 2017). Available at SSRN: https://ssrn.com/abstract=3072878 or http://dx.doi.org/10.2139/ssrn.3072878

Yanying Chen

School of Economics, Singapore Management University ( email )

90 Stamford Road
Singapore, 178903
Singapore

Yi Jin Tan (Contact Author)

School of Economics, Singapore Management University ( email )

90 Stamford Road
Singapore, Singapore 178903
Singapore

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