Possible Welfare Benefits of a Basic Income Support: Evidence from a benefit incidence analysis in South Africa

Carolyn Chisadza (), Margaret Chitiga-Mabugu (), Ramos Mabugu (), Nicky Nicholls (), Kehinde Oluwaseun Omotoso () and Eleni Yitbarek ()
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Carolyn Chisadza: University of Pretoria
Margaret Chitiga-Mabugu: University of Pretoria
Ramos Mabugu: Sol Plaatje University
Nicky Nicholls: University of Pretoria
Kehinde Oluwaseun Omotoso: University of Pretoria
Eleni Yitbarek: University of Pretoria

No 28, ERSA Working Paper Series from Economic Research Southern Africa

Abstract: The study investigates the potential welfare effect of basic income support in reducing poverty and inequality in South Africa. Using the 2017 labour force survey and a benefit incidence analysis, we consider three basic income support scenarios: i) universal income support for those aged between 18 and 59; ii) only those who are unemployed receive the benefit; and iii) only unemployed individuals in extremely poor households defined by the food poverty line receive the benefit. Results show that basic income support can reduce poverty and inequality. However, the specific effects of the basic income support will depend on the targeting scenario considered. The universal basic income support is more costly and has higher leakage, with more benefits going to the non-poor. However, this universal support has the biggest overall impact on poverty and inequality reduction because more South Africans receive income support under this scenario. Meanwhile, targeting only the unemployed and the impoverished makes the basic income support more pro-poor and progressive, as well as mitigating the leakage of the benefit to the non-poor. This scenario would however require that an appropriate targeting mechanism is in place.

Keywords: Basic income support; benefit incidene analysis; poverty; inequality (search for similar items in EconPapers)
JEL-codes: E62 H20 H22 H31 (search for similar items in EconPapers)
Date: 2024-08
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Published in ERSA Working Paper Series, August 2024

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