Some of the above-mentioned studies and others have also focused on the effects of social pension programs on labor supply. Galiani, Gertler and Bando (2016) find that the proportion of treated individuals doing paid work is reduced and most of these individuals switch to work in family businesses. Using data from Mexico’s 2010 national census, Juarez and Pfutze (2015) finds that the _70 y mas_ pension program had a negative effect on labor force participation of male beneficiaries, insignificant effects on female beneficiaries, and a negative effect on the same outcome variable for poor young adolescents. This study captured the effect for adults that are 70 years old or older who lived in villages with fewer than 30,000 inhabitants.

Other well-known studies also focused on labor supply, including intra-household effects. Using cross sectional data, Bertrand, Mullainathan, and Miller (2003) finds that the South African social pension program caused a reduction in the hours worked of prime-aged individuals living with an elderly in extended families. In contrast, Ardington, Case, and Hosegood (2009) uses longitudinal data and finds that the same South African social pension program has a small positive effect in the employment of prime-aged adults mainly because these prime-aged adults are significantly more likely to be labor migrants. Edmonds (2006) finds that social pensions in South Africa increased schooling attendance and reduced child labor.

Amuedo-Dorantes and Juarez (2015) finds that _70 y mas_ had crowding out effects on private transfers from other households of rural beneficiaries, and concludes that the non-labor income of beneficiaries increases but not as much as the amount of the social pension cash transfer.

In sum, the literature reviewed for social pension programs and numerous other studies on the effects of cash transfer programs on poverty (e.g. Grosh et al, 2008; Fiszbein et al, 2009) suggest that it is likely that the expansion of the federal social pension program PAM in Mexico has attributable effects in reducing (old-age) poverty. Undoubtedly, social pensions can reduce poverty, although whether they actually reduce it and by how much remains an empirical question. Our contribution is answering the question of what are the effects of expanding PAM on extreme poverty and labor supply of old age individuals of 66 to 69 years of age.

# 3. Effects of PAM on Poverty and Labor Supply

## 3.1 The Pension Program for the Elderly – PAM

The Pension Program for the Elderly (PAM) started in 2007 providing a cash transfer of $500 pesos per month per beneficiary paid every two months,<sup>5</sup> with the objective to improve the life conditions of people 70 years old or older in rural villages. Since then, eligibility rules and other characteristics of the program have changed over time. In the next paragraphs, we briefly recount the evolution of the program’s main characteristics and the interaction of PAM with other relevant social protection programs.<sup>6</sup> Appendix B also shows a summary of the changes to PAM over time.

> 5The Operating Rules also mentioned that in the villages where accessibility is an issue or paying the cash transfer every two months has a very high cost, the delivery of the cash transfer could be done every four months. The benefit of 500 pesos per month was 16% of the average monthly current per capita income of 2007.

> 6The specifics on the changes in the program’s characteristics were obtained from the respective publication of the updated Program’s Rules of Operation in the Official Federal Gazette.

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