Household Responses to Adverse Income Shocks: Pensioner Out-Migration and Mortality in South Africa

Vimal Ranchhod, University of Michigan

How do households cope with negative income shocks in developing countries? South Africa’s unique social pension system results in most of the poor elderly receiving a generous income transfer from the state. This generally makes the pensioner the primary ‘breadwinner’ in the household. Several researchers have shown that pension recipiency in South Africa results in improved household welfare, along dimensions including child health, schooling enrollment of children and the consumption of leisure of prime aged adults. In this paper, I estimate the effects of a pensioner leaving the household, using nationally representative matched panel data from several waves of the South African Labour Force Surveys. Preliminary results suggest that the main coping mechanism is for prime aged adults to increase their labor supply, with no evidence that schooling enrollment of youth is adversely affected, and only limited evidence that it affects youth labor supply.