Child Health and Household Resources in South Africa: Evidence from the Old Age Pension Program

This paper presents nonparametric evidence on the effects of the expansion of the Old Age Pension program in South Africa on child health. Did this increase in household resources improve child health and nutrition? Does the gender of the recipient of the pension affect its impact? The answers to these questions have very important policy implications. There is evidence that inadequate nutrition during childhood (and even in utero) affects long-term physical development, as well as the development of cognitive skills. This in turn affects productivity later in life (see Partha Dasgupta, 1993; John Strauss and Duncan Thomas, 1998; T. Paul Schultz, 1999). In the United States, the evidence suggests that monetary transfers to the poor have very little impact on child welfare (Janet Currie, 1995; Susan Mayer, 1997). However, the effects of parental income and monetary transfers on child outcomes are likely to be of greater magnitude among poor households in developing countries. The South African Pension program provides an unusual opportunity to evaluate the possible effects of such a monetary transfer. This paper exploits the rapid increase in the coverage and benefits of the Old Age Pension program in South Africa which took place in the early 1990’s (Anne Case and Angus Deaton, 1998). At the end of the apartheid era, the government committed to achieving parity of benefits and eligibility requirements between whites and Africans. This was achieved mostly by increasing the benefits received by the Africans. In 1993, 80 percent of African women above age 60 and 77 percent of African men above 65 received the pension. The maximum benefit of 370 rands per month (aproximately 3 per day) was equal to half of the minimum wage, and about twice the median income per capita in rural areas. Due to living arrangements inherited from the apartheid era, close to onethird of African children under the age of 5 currently live with a pension recipient. Children who live with a pension recipient tend to come from relatively disadvantaged backgrounds. As a consequence, they tend to be smaller than other children their age. To estimate the effect of receiving a pension on the anthropometric status of children, this paper exploits the fact that height reflects accumulated investments in child nutrition. The larger the proportion of her life during which a child is well-nourished, the taller she will be, given her age. Due to the expansion of the program in the early 1990’s, individuals of qualified age became more likely to receive a pension, and the benefits became substantially larger. Thus, children born after the expansion of the program are more likely to have spent a larger fraction of their lives wellnourished, if they live with a pension recipient, to the extent that the pension resulted in improved nutrition. In this paper, I present nonparametric evidence of the program’s effect on nutrition based on this observation.