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The Marginal Propensity to Earn and Consume out of Unearned Income: Evidence Using an Unusually Large Cash Grant Reform
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2012 (English)In: Scandinavian Journal of Economics, ISSN 0347-0520, E-ISSN 1467-9442, Vol. 114, no 4, 1393-1413 p.Article in journal (Refereed) Published
Abstract [en]

In this paper, we use the rapid introduction of an unconditional cash grant (child support) in South Africa to estimate the marginal propensity to consume and earn out of unearned income. We find that the marginal propensity to earn is about -0.3 and that the marginal propensity to consume is about 0.7. Nothing of the grant appears to be saved; if anything, households dissave against future grant payments. The marginal propensities estimated here are similar to those reported in comparable papers using US data. However, they stand in contrast to some results on conditional cash transfers in other developing countries.

Place, publisher, year, edition, pages
2012. Vol. 114, no 4, 1393-1413 p.
Keyword [en]
Child support, labor supply, least absolute deviation, robust regression, South Africa, H31, J22, O23
National Category
Social Sciences
URN: urn:nbn:se:uu:diva-189937DOI: 10.1111/j.1467-9442.2012.01726.xISI: 000311608300015OAI: oai:DiVA.org:uu-189937DiVA: diva2:582573
Available from: 2013-01-04 Created: 2013-01-04 Last updated: 2013-01-04Bibliographically approved

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Bengtsson, Niklas
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