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AEC 2012 - Disability Grant and Individual Labour Supply Evidence from South Africa

16-Oct-2012

Despite the explosive growth in the number of people receiving disability beneÖts in South Africa, very little is known about the labour supply e§ects of the beneÖts. This study aims at estimating the impact of the Disability Grant Programme (DGP) on labour force participation. Consideration is given to potential bias that may arise from unobserved confounding factors. We use data drawn from the 2007 wave of the General Household Survey (GHS) and implement a three-step methodology in a comparative perspective. Firstly, we implement an ordinary least squares regression followed by an instrumental variable regression to correct for possible endogeneity of DG take up. Finally, we check the sensitivity and robustness of the results by implementing a variety of propensity score matching techniques. The results overall suggest that the DGP has work disincentive e§ects, but the magnitude of the e§ects di§ers between parametric and non-parametric estimators.

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