The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico

Abstract

We estimate the effect of 70 y Más, an age-conditioned cash transfer program for individuals age 70 and older in rural Mexico, on the labor force participation of beneficiaries and of younger individuals who live with them. Using data from the 2010 Mexican census, we exploit the age and locality population thresholds to identify the effects of the program, which at the time operated only in localities with less than 30,000 inhabitants. We find that the program reduces the labor force participation of elderly men, particularly those who live alone and who are relatively poor, but has a much weaker effect on that of elderly women. The program has no statistically significant effect on the labor force participation of either prime-age men or women who live with potential beneficiaries, and it has a negative and significant effect on the labor force participation of boys age 12–17, particularly those in the lowest wealth quintiles, but not on that of same-age girls. These results suggest that the program affects mostly the labor supply of the intended beneficiaries and that of marginal workers, like adolescent boys.

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