Labor Supply Responses To Large Social Transfers: Longitudinal Evidence From South Africa

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, the authors 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. This ability to compare households and individuals before and after pension receipt, and pension loss, allows one to control for a host of unobservable household and individual characteristics that may determine labor market behavior. They find that large cash transfers to elderly South Africans lead to increased employment among prime-aged members of their households.