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Public Policy and Extended Families: Evidence from Pensions in South Africa
Authors:Bertrand  Marianne; Mullainathan  Sendhil; Miller  Douglas
Institution:Marianne Bertrand is Associate Professor of Economics, University of Chicago Graduate School of Business, Center for Economic and Policy Research, and National Bureau of Economic Research. Her e-mail address is marianne.bertrand{at}gsb.uchicago.edu. Sendhil Mullainathan is Associate Professor of Economics, Massachusetts Institute of Technology and National Bureau of Economic Research. E-mail: mullain{at}mit.edu. Douglas Miller is Assistant Professor of Economics, University of California, Davis. His e-mail address is dlmiller{at}uc.davis.edu.
Abstract:How are resources allocated within extended families in developingeconomies? This question is investigated using a unique socialexperiment: the South African pension program. Under that programthe elderly receive a cash transfer equal to roughly twice theper capita income of Africans in South Africa. The study examineshow this transfer affects the labor supply of prime-age individualsliving with these elderly in extended families. It finds a sharpdrop in the working hours of prime-age individuals in thesehouseholds when women turn 60 years old or men turn 65, theages at which they become eligible for pensions. It also findsthat the drop in labor supply is much larger when the pensioneris a woman, suggesting an imperfect pooling of resources. Theallocation of resources among prime-age individuals dependsstrongly on their absolute age and gender as well as on theirrelative age. The oldest son in the household reduces his workinghours more than any other prime-age household member.
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