Social transfers and labor supply: Long run rvidence from South Africa
Kanishka Kacker ()
MPRA Paper from University Library of Munich, Germany
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.
Keywords: Pension; Labor Supply; Panel Data; NIDS (search for similar items in EconPapers)
JEL-codes: H23 H55 I38 J22 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99044
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