Pensions and Health in South Africa

Many social and economic changes are associated with the end of the apartheid regime in South Africa. One such change was the dramatic increase in the public pension paid to African, Indian and Coloured elderly of that country. Over a very short period of time, the number of public pension recipients increased from 50,000 to over 1.5 million South Africans. And from the perspective of most families in South Africa, the pension represents a sizable amount of money. It is more than double the median Black income per capita. With the expansion of the pension system, there was -- almost overnight -- a truly dramatic change in the economic resources available to a very large number of South African households.

What was the effect of the expanded pension payments on the lives of older people in South Africa? And to what extent did the beneficial effects of the program extend beyond the immediate pension recipients to their children and grandchildren? A new NBER study by Anne Case, Does Money Protect Health Status? Evidence from South African Pensions (NBER Working Paper 8495 ) considers just these questions, focusing specifically on the implications of the expanded pension system for health and longevity. Case finds that the pension has a clear and significant impact in improving health.

Case's study uses information on Black and Coloured individuals from a new survey of residents in the Langeberg Health District of South Africa, most of whom live in large multi-generational households. The survey includes separate interviews with each adult in the participating households, and combines both quantitative and qualitative information about the households. In households with one or more pension recipients, an important distinction is made between those that "pool money" into a common household fund, and those that do not.

Among the health measures used in the survey, respondents are asked to self-rate their health as excellent, good, average, poor, or very poor. While imperfect, self-reported health measures have been shown in past research to be highly correlated with "objective" health measures, such as mortality. In South African households that pool money -- and most do -- having a pension recipient in the household improves the average self-reported health response of all adults in the household by one-half step (from "average" toward "good," for example). Compared with most studies of self-reported health, this one-half step increment represents a very large increase.

Other measures of health reinforce these findings. For example, children in households with a pension recipient are taller -- by an amount equal to about one-half year of age. Asked in what ways life became better when the pension started, people responded that they were better able to provide food for their families, or to upgrade the quality of their housing. Better nu-trition and better sanitation were identified in the study as important mechanisms through which pension receipt affected health. The pension was also found to reduce stress and improve psychological health.

Interestingly, in the minority of households that did not pool money, the health benefits of the pension seemed to be isolated to the pension recipient, and not to their extended family. The self-reported health status of pension recipients in these households (adjusted for age, race and gender) was a full step better (moving from "average" to "good," for example) than that of other household members.

The Case study is part of a continuing NBER project to study the pension system in South Africa and its substantial impact on recipients and their families.

The research was funded by the National Institute on Aging and the MacArthur Foundation. It was summarized by Richard Woodbury.

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