Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa

Cally C. Ardington, University of Cape Town
Anne Case, Princeton University
Victoria Hosegood, London School of Hygiene and Tropical Medicine

We analyze longitudinal data from a demographic surveillance area in KwaZulu-Natal to quantify the impact of the South African old-age pension on the labor force attachment of prime-aged adults in households with pensioner members. With panel data, we are able to compare households and individuals before and after pension receipt, and pension loss, allowing us to control for a host of unobservable household and individual characteristics that may determine labor market behavior. In sharp contrast to earlier work on this topic that relied on cross-sectional data analysis, we find no evidence of a reduction in labor supply in response to pension receipt. Indeed our results suggest that prime-age adults are more likely to migrate either to work or to look for work when pension receipt begins. Our results highlight the importance of including non-resident members in the analysis of household and individual behaviors.