Nber Working Paper Series Paying the Piper: the High Cost of Funerals in South Africa

We analyze funeral arrangements following the deaths of 3,751 people who died between January 2003 and December 2005 in the Africa Centre Demographic Surveillance Area. We find that, on average, households spend the equivalent of a year’s income for an adult's funeral, measured at median per capita African (Black) income. Approximately one-quarter of all individuals had some form of insurance, which helped surviving household members defray some fraction of funeral expenses. However, an equal fraction of households borrowed money to pay for the funeral. We develop a model, consistent with ethnographic work in this area, in which households respond to social pressure to bury their dead in a style consistent with the observed social status of the household and that of the deceased. Households that cannot afford a funeral commensurate with social expectations must borrow money to pay for the funeral. The model leads to empirical tests, and we find results consistent with our model of household decision-making. Anne Case 367 Wallace Hall Princeton University Princeton, NJ 08544 and NBER [email protected] Anu Garrib Africa Centre for Health and Population Studies University of KwaZulu-Natal KwaMsane, KwaZulu-Natal South Africa [email protected] Alicia Menendez Harris School of Public Policy University of Chicago Chicago, IL 60637 [email protected] Analia Olgiati Wallace Hall Princeton University Princeton, NJ 08544 [email protected]