Unintended Labor Supply Effects of Cash Transfer Programs: New Evidence from South Africa’s Pension

Abstract

Using South Africa’s first nationally representative panel data set, I find that the presence of pension recipients in the household reduces the probability of employment of both previously employed and unemployed prime-aged adults. Exploiting institutional features of the disability grant to isolate the pension’s income effect suggests that the effects operate through the income mechanism. By contrast, there is no evidence that pensioners enable household members to work by providing childcare as concluded by previous studies.