“Blood-transfusion” or “blood-making”: the impact of public transfer payment on labour supply

Abstract

ABSTRACT Leveraging the ‘blood-making’ function of public transfer payments and stimulating the endogenous motivation of beneficiaries are key focus for poverty alleviation worldwide. Based on the data from 2014–2018 China Family Panel Studies (CFPS) and machine learning algorithms, this article comprehensively evaluate the effect of Chinese public transfer payment system on labour supply. We find that public transfer payments oriented households increase the labour supply of family members. Decomposing the comprehensive effect, public transfer payments increase the employment probability at the extensive margin and extend the working hours at the intensive margin. Mechanism analysis indicates that public transfer payments is conducive to enhance health capital, promote labour skill training, and relax constraints on infant and child care, thus improving labour supply. Furthermore, groups in female, young, and education below high school show a higher incentive effect for labour supply.