The data used for our analysis is drawn from the first four waves of the National Income
Dynamic Study to determine the factors that influence poverty and household welfare in South
Africa. Contrary to most existing studies, which have applied ordinary least squares and
probit/logit models on cross-sectional data, this analysis captures unobserved individual
heterogeneity and endogeneity, both via fixed effect, and via a robust alternative based on
random effect probit estimation. The results from fixed effect and random effect probit indicate
that levels of education of the household head, some province dummies, race of the household
head, dependency ratio, gender of the household head, employment status of the household
head and marital status of the household head are statistically significant determinants of
household welfare. Consistent with previous research, we also found that, compared to
traditional rural areas (used as reference category), households living in urban and farms are
less likely to be poverty stricken, which implies that rural areas (traditional rural areas) should
continue to be a major focus of poverty alleviation efforts in South Africa.