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The Effect of an Old-Age Demogrant on the Labor Supply and Time Use of the Elderly and Non-Elderly in Mexico

Abstract This paper estimates the effect of a generous demogrant for individuals age 70 and older that started in 2001 in Mexico City on the labor supply and time use of beneficiaries and of non-elderly family members who live with them. Using a triple differences approach, I find that the program has no significant effect on the time use of eligible individuals, except for the sharp decrease in the housework participation of elderly women who live with another potential beneficiary. Individuals 60 to 69 years old change their time use only if they live with a potential beneficiary, but not because they expect to receive the demogrant themselves in a few years. In particular, men in their 60s seem to retire early if they live with someone who qualifies for the transfer. Both men and women 18 to 59 years old increase their labor supply if they live with an eligible man, but decrease it if they live with an eligible woman. These results are consistent with income in the hands of elderly women being shared more with younger family members than income in the hands of elderly men.