Household responses to adverse income shocks: Pensioner out-migration and mortality in South Africa

How do poor households respond to the cessation of cash transfers in developing countries? South Africa’s generous social pension system results in most of the poor elderly being the primary `breadwinner’ in the household. I estimate the magnitude of the changes in household composition and labour force activity amongst the resident members of the household, that correlate with a pensioner leaving the household. I use nationally representative matched panel data from several waves of the South African Labour Force Surveys. Compositional changes include the out-migration of school-aged children, and in-migration of middle aged females and older adults of either gender. More than 1 in 4 losing households get an additional older adult. For people who maintain their residency status across waves, I find large and statistically significant increases in employment rates for middle aged females and males (9.3 and 8.1 percentage points in each case), as well as for older adult females and males (10.3 percentage points in each case). For middle aged adults, this is not accompanied by a corresponding increase in labour supply.