Rearranging the Family?

Abstract

This study examines the link between income and living arrangements. Our identification comes from exploiting a discontinuity in age in the benefit formula for the social pension in South Africa. In contrast to previous literature, we find no association between pension income and elderly independence. We do find that potential beneficiaries alter their household structure when they become pension-eligible. Prime working-age women depart, and the presence of children younger than five and young women of childbearing age increase. These shifts in coresidence patterns are consistent with a setting where prime-age women have comparative advantage in work away from extended family relative to younger women. The additional income from old-age support may induce a change in living arrangements to exploit this advantage.