The marginal propensity to earn and consume out of unearned income: Evidence using an unusually large cash grant reform

Niklas Bengtsson ()

No 2011:7, Working Paper Series, Center for Labor Studies from Uppsala University, Department of Economics

Abstract: We use a rapid introduction of an unconditional cash grant (child support) in South Africa to estimate the marginal propensity to consume and earn out of unearned income. We find that the marginal propensity to earn is about –0.3 and the marginal propensity to consume about 0.7. Nothing of the grant appears to be saved; if anything, households dissave against future grant payments. The marginal propensities estimated here are similar to those reported in comparable papers using US data. However, they stand in contrast to some results on conditional cash transfers in other developing countries.

Keywords: Child support; Labor supply; Robust regression; Least absolute deviation; South Africa (search for similar items in EconPapers)
JEL-codes: H31 J22 O23 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-04-18
New Economics Papers: this item is included in nep-afr
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Related works:
Journal Article: The Marginal Propensity to Earn and Consume out of Unearned Income: Evidence Using an Unusually Large Cash Grant Reform (2012)
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