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Effect of Means-Tested Social Transfers on Labor Supply: Heads Versus Spouses—An Empirical Analysis of Work Disincentives in the Kyrgyz Republic

The European Journal of Development Research volume 31, pages 189–214 (2019)Cite this article

Abstract

Popular perceptions that the provision of income transfers to poor households creates work disincentives prevail. Existing evidence is mixed and depends on the country, the type of transfer, and the population group analyzed. This paper empirically estimates potential work disincentives of a means-tested social transfer for adults with different household positions. Using data from the Kyrgyz Integrated Household Survey 2012, the analysis compares labor market outcomes for household heads and spouses using quasiexperimental methods to assess transfer effects on labor supply. Overall, beneficiaries have on average higher labor market participation rates, but results differ by household position and socioeconomic context. Household heads in beneficiary households are less likely to be economically active than similar nonbeneficiaries. Yet, spouses are more likely to be economically active. Moreover, outcomes depend on whether the household is located in the south or the north of the country.

La perception populaire selon laquelle le transfert monétaire aux foyers pauvres crée une désincitation au travail reste dominante. Les preuves existantes sont mitigées et dépendent à la fois du pays, du type de transfert ainsi que du groupe de population ciblé. Cet article évalue de façon empirique la potentielle désincitation au travail provoquée par un transfert social, en fonction des ressources disponibles pour les adultes, et selon leur position au sein du foyer. En utilisant les données de l’enquête intégrée des foyers kirghizes de 2012, l’analyse compare les résultats du marché du travail pour les chefs de famille et pour leur conjoint avec des méthodes quasi expérimentales pour évaluer les effets de transfert sur l’offre de main-d’œuvre. Globalement, les bénéficiaires ont en moyenne des taux plus élevés de participation au marché du travail, mais les résultats diffèrent selon la position occupée au sein de ménage et selon le contexte socio-économique. Les chefs de famille des foyers bénéficiaires sont moins susceptibles d’avoir une activité économique que leurs homologues non-bénéficiaires. Pourtant, les conjoints sont plus susceptibles d’avoir une activité économique. De plus, les résultats varient selon que le ménage est situé dans le sud ou le nord du pays.

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Notes

  1. 1.

    This assumes elastic labor supply, an assumption which is rather unlikely in most lower- and middle-income countries (Barrientos and Villa 2015).

  2. 2.

    Barrientos and Kudebayeva (2015) apply binary models to the cross-section and panel component of the Life in Kyrgyzstan data

  3. 3.

    Equivalent to 19.36 USD PPP in 2012 (USD PPP from IMF 2015).

  4. 4.

    The extreme poverty line was KGS 1286 per capita per month in 2012. The absolute poverty line was KGS 2182 (NSC). The GMI is set by government decree depending on the available financial resources and expected number of beneficiaries.

  5. 5.

    Authors’ calculations. See next section for a description of the data.

  6. 6.

    Informal work includes informal employment, informal self-employment, and own production activities in case of unemployment or inactivity.

  7. 7.

    Adults indicating to be day students when reporting their social status were excluded from the analysis given the importance of education for human capital development.

  8. 8.

    Differences across quarters are not statistically significant.

  9. 9.

    South: Osh, Jalalabad, Batken. Differences are statistically significant at 99% confidence level.

  10. 10.

    The average treatment effect (ATT) of the treated was estimated using the Stata program teffects psmatch.

  11. 11.

    Stata14 provides the command tebalance summary, used after teffects psmatch, which calculates for each covariate the standardized difference, that is, the size of the difference in means of a conditioning variable (between the treatment and comparison units), scaled by (or as a percentage of) the square root of the average of their sample variances, and the variance ratio. In this paper, after estimating the ATT using teffects psmatch, tebalance summary was used.

  12. 12.

    Across quarters, treatment and control groups remain the same, as individual and household characteristics are based on the situation in the first quarter.

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Acknowledgements

We thank the National Statistical Committee of the Kyrgyz Republic for the provision of the data.

Author information

Affiliations

  1. UNU-MERIT/MGSOG, Maastricht University, PO Box 616, 6200 MD, Maastricht, The Netherlands

    Franziska Gassmann

  2. Center for Social Policy Herman Deleeck, University of Antwerp, Sint-Jacobstraat 2-4, 2000, Antwerp, Belgium

    Lorena Zardo Trindade

Authors
  1. Franziska Gassmann
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  2. Lorena Zardo Trindade
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Corresponding author

Correspondence to Franziska Gassmann.

Annex

Annex

See Fig. 3 and Tables 4, 5, 6, 7, 8, 9, and 10.

Fig. 3
figure3

Diagnostic kernel density distribution of the propensity score for active labor market participation. Source: Authors’ calculations based on KIHS 2012

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Table 4 Summary statistics for variables used in the analysis.
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Table 5 Covariate balance summary of the propensity score for active labor market participation.
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Table 6 Determinants of active labor market participation using a linear probability model with exogenous MBPF, 2012.
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Table 7 Determinants of extended employment (including unpaid work) using a linear probability model with exogenous MBPF, 2012.
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Table 8 Determinants of informal work for employed (extended definition) using a linear probability model with exogenous MBPF, 2012.
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Table 9 Determinants of work intensity using a Heckman selection model with exogenous MBPF, 2012.
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Table 10 Determinants of MBPF participation using a linear probability model, 2012.
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Gassmann, F., Trindade, L.Z. Effect of Means-Tested Social Transfers on Labor Supply: Heads Versus Spouses—An Empirical Analysis of Work Disincentives in the Kyrgyz Republic. Eur J Dev Res 31, 189–214 (2019). https://doi.org/10.1057/s41287-018-0142-7

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Keywords

  • Social transfers
  • Work disincentives
  • Intrahousehold allocation
  • Transition economy
  • Kyrgyz Republic

JEL Codes

  • I38
  • J22