Resumen

We estimate the effect of a permanent income increase for the elderly on their health outcomes. Our regression discontinuity design exploits an eligibility cutoff in a Chilean basic pension program that grants monthly payments of 40 percent of the minimum wage to pensionless retirees. Four years after applying, pension recipients are 2.5 percentage points less likely to die. Effects are concentrated on pension recipients living without working-age relatives, who in turn have more children if living with recipients. This seems explained by pre-existing income transfers from working-age relatives to retirees, which cease when payments begin. Results suggest that increasing income for older individuals could reduce health inequalities across income groups, and mitigate the intergenerational transmission of poverty by alleviating the financial burden on younger relatives.