Old Age Pensions and the Well-Being of Children and Grandchildren: New Evidence from South Africa

Amar A. Hamoudi, University of California, Los Angeles
Duncan Thomas, University of California, Los Angeles

The Old Age Pension in South Africa is a large public cash transfer which has been shown to benefit children and young adults. This paper re-assesses that evidence. Using data from the 2000 Income and Expenditure Survey and the 1998 Demographic and Health Survey, we evaluate two key assumptions that underlie the estimation strategy adopted in the literature. First, take-up of the pension is assumed to be universal. We show that it is not universal and that estimated effects of pension income turn on whether take-up is modeled. Treating take-up as endogenous, we find that pension income is treated no differently from any other income in the household. Second, household composition is treated as given. We provide suggestive evidence that household composition is related to take up of the pension suggesting models of pension income and resource allocation need to treat household composition as endogenous.