Social Transfer Benefits and Retirement Decisions: Evidence from South Africa

Social Transfer Benefits and Retirement Decisions: Evidence from South Africa Population aging poses a new challenge to the fiscal sustainability of social security programs around the globe. As life expectancy increases, among other reasons, many governments in developed countries have begun to reform key features of their programs, such as increasing the eligibility age for access to social benefits. However, as in the case of South Africa, some opt to decrease the eligibility age for access to such pension benefits. The South African old age pension, which is one of the most expansive cash transfers in developing countries, puts a significant monthly cash transfer in the hands of its recipients. This cash transfer is conditioned on age and a means test that is very generous to most South Africans. In this paper, we seek to understand the impact of such an increase in non‐labour income on the labour force participation of older men by exploiting a phased‐in reduction in pension eligibility age. We estimate that, at the median predicted market wage, pension age‐eligibility reduces the probability of labour force participation by approximately 9.85% points for single males and 15.45% points for married males. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The South African Journal of Economics Wiley

Social Transfer Benefits and Retirement Decisions: Evidence from South Africa

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Publisher
Wiley Subscription Services, Inc., A Wiley Company
Copyright
© 2018 Economic Society of South Africa
ISSN
0038-2280
eISSN
1813-6982
D.O.I.
10.1111/saje.12180
Publisher site
See Article on Publisher Site

Abstract

Population aging poses a new challenge to the fiscal sustainability of social security programs around the globe. As life expectancy increases, among other reasons, many governments in developed countries have begun to reform key features of their programs, such as increasing the eligibility age for access to social benefits. However, as in the case of South Africa, some opt to decrease the eligibility age for access to such pension benefits. The South African old age pension, which is one of the most expansive cash transfers in developing countries, puts a significant monthly cash transfer in the hands of its recipients. This cash transfer is conditioned on age and a means test that is very generous to most South Africans. In this paper, we seek to understand the impact of such an increase in non‐labour income on the labour force participation of older men by exploiting a phased‐in reduction in pension eligibility age. We estimate that, at the median predicted market wage, pension age‐eligibility reduces the probability of labour force participation by approximately 9.85% points for single males and 15.45% points for married males.

Journal

The South African Journal of EconomicsWiley

Published: Jan 1, 2018

Keywords: ; ; ; ; ; ;

References

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