The labour market effects of cash transfers to the unemployed: Evidence from South Africa

Abstract

This paper considers the labour market effects of an unconditional cash transfer targeted at the unemployed in a context of extreme unemployment. Using a staggered, heterogeneity-robust difference-in-differences design applied to panel labour force survey data, we estimate the contemporaneous and dynamic effects of a new transfer introduced in South Africa, the Social Relief of Distress grant, the first labour market-linked transfer in the country’s history. Our results suggest that cash transfers can help reduce labour market constraints but such gains need not translate into better longer-term employment prospects in high-unemployment contexts.