Can Cash Transfers to the Unemployed Support Economic Activity? Evidence from South Africa

Haroon Bhorat, Timothy Köhler () and David de Villiers ()
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David de Villiers: Development Policy Research Unit, University of Cape Town

Working Papers from University of Cape Town, Development Policy Research Unit

Abstract: Persistently high unemployment has plagued South Africa over the last few decades, while concurrently there has been a dearth of state-provided income support to the working-age economically active population. In response to the pandemic the government introduced the COVID-19 Social Relief of Distress grant – the country’s first unconditional cash transfer targeted at the unemployed. At the time of writing, however, no causal evidence of the grant’s effects exist. We adopt a doubly robust, semi-parametric Difference-in-Differences approach on representative panel labour force data to estimate the contemporaneous and cumulative causal effects of the grant on labour market outcomes. We find robust evidence that the grant increased average employment probabilities by approximately 3 percentage points, an effect largely driven by wage and formal sector employment. Employment effects vary by duration of receipt, with larger effects estimated for the short-term which reduce to zero with additional periods of receipt. We additionally find marginally significant effects on the probability of trying to start a business, but no robust evidence on job search. These findings suggest that the grant has performed a multi-purpose role in providing income relief while also enabling a path towards more favourable labour market outcomes.

Keywords: cash transfers; labour market; South Africa; COVID-19; difference-in-differences (search for similar items in EconPapers)
JEL-codes: C54 D04 D31 H53 J48 J68 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2023-03
New Economics Papers: this item is included in nep-dev
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Published in Working Paper Series by the Development Policy Research Unit, March 2023, pages 1-46

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Working Paper: Can Cash Transfers to the Unemployed Support Economic Activity? Evidence from South Africa (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ctw:wpaper:202301

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