Bureau for Department of Economic Research Economics University of Stellenbosch HOUSEHOLD FORMATION, POVERTY AND UNEMPLOYMENT – THE CASE OF RURAL HOUSEHOLDS IN SOUTH AFRICA SONJA KELLER Stellenbosch Economic Working Papers : 1 / 2004 2 Bureau for Department of Economic Research Economics University of Stellenbosch HOUSEHOLD FORMATION, POVERTY AND UNEMPLOYMENT – THE CASE OF RURAL 1 HOUSEHOLDS IN SOUTH AFRICA Sonja Keller Stellenbosch Economic Working Papers : 1 / 2004 February 2004 Sonja Keller Department of Economics, University of Stellenbosch & Nuffield College, Oxford University E-MAIL:
[email protected] HOUSEHOLD FORMATION, POVERTY AND UNEMPLOYMENT – THE CASE OF RURAL HOUSEHOLDS IN SOUTH AFRICA 1 This paper was originally written in 2002 as part of a larger research project for FASID (Foundation for Advanced Studies in International Development), on The role of rural institutions in a globalising South African economy. 3 Abstract The paper examines household formation and composition decisions within the context of risk reduction and risk mitigation strategies of the poor in South Africa. A multi-level heckprobit estimator is employed in order to capture the influence of various factors at the individual, household and regional level, and we focus on the implications of the presence of pensioners and the unemployment on household composition and structure. Results are consistent with earlier findings that pensions are a key insurance mechanism for cushioning younger household members against adverse labour market conditions in rural South Africa. Hence they explain the propensity by household members to postpone formation of new independent household in order to continue living in multigenerational households. JEL classification: D13, J12, J61, D64, I30, R20 4 1.