Bargaining with Grandma: The Impact of the South African Pension on Household Decision-Making

Kate Ambler, University of Michigan

I use the 2008 South African National Income Dynamics Survey to examine how the arguably exogenous increase in income provided by the South African pension affects decision-making in the household. Exploiting the age discontinuity in pension eligibility, I find that eligible females are 12 to 16 percentage points more likely to be the primary decision-makers for expenditures--rare direct support for bargaining models of the household. There is no effect for men. This increase in decision-making power provides a channel through which the pension results in positive impacts for households. As in Duflo (2003) female eligibility leads to improved nutritional outcomes for girls and, additionally, higher levels of durable goods ownership. An analysis of income data shows that due to labor force withdrawal, male income does not increase with eligibility, indicating that, despite previous evidence, elderly women in South Africa do not necessarily direct income towards more productive uses then men.