Welfare Programs for Older Population: Does Frequency of Payment Matter?

Emma Aguila, RAND Corporation
Arie Kapteyn, RAND Corporation
Francisco Perez Arce, RAND Corporation

In this study, we analyze the impact of non-contributory pension programs on the wellbeing of older population when the cash transfer is disbursed with a different frequency of payment (monthly vs bimonthly). At least 60 countries around the world, including South Africa, have introduced noncontributory pension programs for the elderly. Using a quasi-experimental approach with difference-in-differences propensity score matching estimates, we find evidence that a monthly benefit has larger impacts decreasing poverty while the bi-monthly benefit is associated with a larger increase of the consumption of durable goods. In addition, we find evidence that bi-monthly benefits may increase peer pressure on the older recipients to share resources with other family members and a deterioration of the older persons’ relationship with their family. Most poverty alleviation programs in the world are disbursed bimonthly and our findings suggest this should be changed to a lower frequency of payment.