Old-Age Pensions and Joint Retirement Decisions in South Africa

David Lam, University of Michigan
Murray Leibbrandt, University of Cape Town
Vimal Ranchhod, University of Michigan

This paper analyzes the labor force activity of the elderly in South Africa. We focus particular attention on the impact of South Africa's generous non-contributory old-age pension system on retirement decisions. Most black South Africans receive the pension as soon as they become age eligible -- age 60 for women and age 65 for men. We use the sharp age discontinuity as a test of the impact of income on the labor supply of spouses. For example, we analyze the labor supply behavior of two men age 62, one married to a woman who is age 59 and the other to a woman who is age 60. Since pension receipt is highly predictable, the labor supply impact of a spouse's pension is informative about the extent to which households are able to smooth consumption, as well as being informative about income effects on elderly labor supply.