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Stellenbosch Working Paper Series No. WP01/2004

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.

Keywords: households, poverty, unemployment, rural South Africa

JEL Classification: D13, J12, J61, D64, I30, R20