Transfer Payments and Labor Force Participation in Low Income Counties

Previous scholarship on transfer programs focus on single program, or group of programs, and analyse their impact on social outcomes. Thus, less is known about large scale government transfer programs and their impact on the labor supply, especially in the developing world. This research addresses the gap in the existing literature and assesses the relationship between government transfer programs and labor force participation in African and other low-income countries. Using data from the World Bank World Development Indicators Database, I construct a fixed effects model to estimate the impact of transfer payments on labor force participation in a cross-country panel from 2001 to 2021. I find little evidence for a relationship between labor force participation and transfers. This suggests that, among low-income countries, there is no decrease in labor force participation due to subsidies and transfers.