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Public Policy and Extended Families: Evidence from South Africa

Author

Listed:
  • Marianne Bertrand

    (Princeton University and NBER)

  • Douglas Miller

    (Princeton University)

  • Sendhil Mullainathan

    (MIT and NBER)

Abstract
Tightly knit extended families, in which people often give money to and get money from relatives, characterize many developing countries. These intra-family flows may mean that public policies may affect a very different group of people than the one they targeted. To assess the empirical importance of these effects, we study a cash pension program in South Africa that targeted the elderly. We use the variation in pension receipt in three-generation households that comes from differences in the age of the elder(s) in the households. We find sharp drops in the labor force participation of prime-age men in these households when the elder women reach 60 or elder men reach 65, the respective ages for pension eligibility. We also find that the drop in labor supply diminishes with family size, as the pension money is split over more people, and with educational attainment, as the pension money becomes less significant relative to outside earnings. Other findings suggest that power within the family might play an important role: (1) labor supply drops less when the pension is received by a man rather than by a woman; (2) middle aged men (those more likely to have control in the family) reduce labor supply more than younger men in the family; and (3) female labor supply is unaffected. These last two findings also respectively suggest that the results are unlikely to be driven by increased human capital investment or by a need to stay home to care for the elderly. As a whole, the program seems to have had large effects on a group - prime age men living with the old - quite different from the ones it targeted, elderly men and women.

Suggested Citation

  • Marianne Bertrand & Douglas Miller & Sendhil Mullainathan, 1999. "Public Policy and Extended Families: Evidence from South Africa," Working Papers 801, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:422
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    References listed on IDEAS

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    Cited by:

    1. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
    2. Pushkar Maitra & Ranjan Ray, 2003. "Resource inflows and household composition: evidence from South African panel data," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 1037-1047.
    3. Marie W. Arneberg & John K. Dagsvik & Zhiyang Jia, 2002. "Labor Market Modeling Recognizing Latent Job Attributes and Opportunity Constraints An Empirical Analysis of Labor Market Behavior of Eritrean Women," Discussion Papers 331, Statistics Norway, Research Department.
    4. Manacorda, Marco & Moretti, Enrico, 2005. "Why Do Most Italian Young Men Live With Their Parents? Intergenerational Transfers and Household Structure," CEPR Discussion Papers 5116, C.E.P.R. Discussion Papers.
    5. Jensen, Robert T. & Richter, Kaspar, 2004. "The health implications of social security failure: evidence from the Russian pension crisis," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 209-236, January.
    6. Jensen, Robert T., 2004. "Do private transfers 'displace' the benefits of public transfers? Evidence from South Africa," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 89-112, January.
    7. Sonja Keller, 2004. "Household Formation, Poverty And Unemployment — The Case Of Rural Households In South Africa1," South African Journal of Economics, Economic Society of South Africa, vol. 72(3), pages 437-483, September.
    8. Frikkie Booysen & Servaas Van Der Berg, 2005. "The Role Of Social Grants In Mitigating The Socio‐Economic Impact Of Hiv/Aids In Two Free State Communities1," South African Journal of Economics, Economic Society of South Africa, vol. 73(s1), pages 545-563, December.
    9. Eric V. Edmonds, 2004. "Does Illiquidity Alter Child Labor and Schooling Decisions? Evidence from Household Responses to Anticipated Cash Transfers in South Africa," NBER Working Papers 10265, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    public policy; cash pension program; labor supply; South Africa;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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