Possible Welfare Benefits of a Basic Income Support: Evidence from a benefit incidence analysis in South Africa

Working Paper 886

The study investigates the potential welfare effect of basic income support in reducing poverty and inequality in South Africa. Using the 2017 labour force survey and a benefit incidence analysis, we consider three basic income support scenarios:

i) universal income support for those aged between 18 and 59;
ii) only those who are unemployed receive the benefit; and
iii) only unemployed individuals in extremely poor households defined by the food poverty line receive the benefit.

Results show that basic income support can reduce poverty and inequality. However, the specific effects of the basic income support will depend on the targeting scenario considered. The universal basic income support is more costly and has higher leakage, with more benefits going to the non-poor. However, this universal support has the biggest overall impact on poverty and inequality reduction because more South Africans receive income support under this scenario. Meanwhile, targeting only the unemployed and the impoverished makes the basic income support more pro-poor and progressive, as well as mitigating the leakage of the benefit to the non-poor. This scenario would however require that an appropriate targeting mechanism is in place.

Keywords: Capital inflows, Sovereign Debt, International Lending Channel, Misallocation

Working Paper 886

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social