Abstract/Summary

This article analyzes the effect of entitlements from the Old Age Pension Program of South Africa on household technical efficiency using a sample of farm households in South Africa’s KwaZulu-Natal province. The analysis is at the household level, and off-farm activities are considered as additional outputs in a nonparametric estimation of technical efficiency. This approach captures the jointness between farm and off-farm activities. The pension’s effect is identified by exploiting the age-eligibility criteria in the pension program. Results show a positive effect of the pension and suggest that this large cash transfer can improve households’ ability to make use of the best available technologies.