Social transfers and labor supply: Long run rvidence from South Africa

Kacker, Kanishka (2019): Social transfers and labor supply: Long run rvidence from South Africa.

Abstract

How do large social transfers affect labor supply? This study analyses the South African pension program to answer this question. I exploit a major demand shock - the South African recession that began in 2008 - in a regression discontinuity design to �nd prime aged adult labor supply falls in response to pension arrival in the household only during the recession for sectors and types of workers affected by the recession. Post-recession, these workers witness an increase in demand and respond by increasing supply. Pension payments consequently have small and statistically insignificant effects on labor supply, a result that contrasts starkly with all existing studies. I argue these results stem from the combination of two forces. When labor demand is weak, the opportunity cost of leisure falls and workers demand more leisure. If a household member draws a pension, with leisure being a normal good, leisure demand increases further.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pension, Labor Supply, Panel Data, NIDS
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I38 - Government Policy ; Provision and Effects of Welfare Programs; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

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