Cash transfers and prices what is the impact of social welfare on prices

Chloe Allison and Neryvia Pillay

No 11057, Working Papers from South African Reserve Bank

Abstract: South Africa faces high inequality and numerous challenges posed by the long-lasting legacies of apartheid. South Africas generous social welfare system represents a major government intervention to address these challenges. Using a province fixed effects model with annual price and household survey data, we study the relationship between existing grants and prices from 2009 to 2021. We observe a significant increase in the prices of goods and services consumed by individuals in the poorest deciles. We find that results are dependent on the type of grant received and the characteristics of beneficiary households. We also find that price increases are particularly evident in markets with inelastic supply, where the demand for goods and services outpaces their supply.

Date: 2024-01-12
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