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

Kanishka Kacker ()

MPRA Paper from University Library of Munich, Germany

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.

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)
Date: 2019-11
New Economics Papers: this item is included in nep-age and nep-pbe
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