We consider the perverse incentive that can be created for poor households that are benefiting from the South African Child Support Grant (CSG). We acknowledge the fact that the CSG has been successful in improving child outcomes. However, if caregivers see the CSG as a livelihood strategy and respond with multiple births, this will jeopardize the fiscal sustainability of the transfer in the long run. Such incentive will also perpetuate poverty and inequality which will defeat the very purpose the CSG is meant to achieve.
Using the National Income Dynamic Study (NIDS) data, we estimate the relationship between CSG receipt and birth attempts over the last decade using count data models. To control for selection, we use instrumental variable under the Control Function (CF) method. We also check the robustness of our result to alternative assumptions like fixed effects.
Our result is robust over the different identification assumptions and shows that those who benefit from the CSG have had more birth attempts within the last decade when compared to non-beneficiaries.
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