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Simulating the Reform of Means-tested Benefits with Endogenous Take-up and Claim Costs

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  • Stephen Pudney
  • Ruth Hancock
  • Holly Sutherland

Abstract

Microsimulation models are commonly used to examine the distributional impact of reforms of the means-tested benefit system. Take-up behaviour is related to the level of entitlement, so reform may induce changes in take-up. We develop a stochastic simulation method and apply it to a probit model of 'income support' take-up by the UK pensioners. The method allows us to adjust net income for the welfare losses because of tangible or intangible claim costs. Endogenous take-up and claim costs both have an important impact on the simulated outcomes of the policy reform. Copyright 2006 Blackwell Publishing Ltd.

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Bibliographic Info

Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 68 (2006)
Issue (Month): 2 (04)
Pages: 135-166

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Handle: RePEc:bla:obuest:v:68:y:2006:i:2:p:135-166

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  1. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers, University of Wisconsin Institute for Research on Poverty 1080-96, University of Wisconsin Institute for Research on Poverty.
  2. Atkinson, A. B. & Sutherland, H., 1998. "Microsimulation and Policy Debate: A Case Study of the Minimum Pension Guarantee in Britain," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9815, Faculty of Economics, University of Cambridge.
  3. Sutherland, Holly, 2001. "EUROMOD: an integrated European benefit-tax model: final report," EUROMOD Working Papers EM9/01, EUROMOD at the Institute for Social and Economic Research.
  4. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, Econometric Society, vol. 52(3), pages 761-66, May.
  5. Stephen Pudney & Monica Hernandez & Ruth Hancock, 2007. "The welfare cost of means-testing: pensioner participation in income support," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 22(3), pages 581-598.
  6. Marlene Kim & Thanos Mergoupis, 1998. "The Working Poor and Welfare Recipiency," Macroeconomics, EconWPA 9810006, EconWPA.
  7. Duclos, Jean-Yves, 1995. "Modelling the take-up of state support," Journal of Public Economics, Elsevier, Elsevier, vol. 58(3), pages 391-415, November.
  8. Pudney, Stephen & Sutherland, Holly, 1994. "How reliable are microsimulation results? : An analysis of the role of sampling error in a U.K. tax-benefit model," Journal of Public Economics, Elsevier, Elsevier, vol. 53(3), pages 327-365, March.
  9. Sutherland H, 2003. "The take-up of Income Support by pensioners: estimates from POLIMOD using the Family Resources Survey," Microsimulation Unit Research Notes, Microsimulation Unit at the Institute for Social and Economic Research MU/RN/42, Microsimulation Unit at the Institute for Social and Economic Research.
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Cited by:
  1. Tomer Blumkin & Efraim Sadka & Yoram Margalioth, 2008. "The Role of Stigma in the Design of Welfare Programs," Working Papers, Ben-Gurion University of the Negev, Department of Economics 0806, Ben-Gurion University of the Negev, Department of Economics.
  2. repec:ese:iserwp:2007-13 is not listed on IDEAS
  3. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2008. "The Role of Stigma in the Design of Welfare Programs," CESifo Working Paper Series 2305, CESifo Group Munich.
  4. Bargain, Olivier & Immervoll, Herwig & Viitamäki, Heikki, 2007. "How Tight Are Safety-Nets in Nordic Countries? Evidence from Finnish Register Data," IZA Discussion Papers 3004, Institute for the Study of Labor (IZA).
  5. Franziska Gassmann, 2013. "Kyrgyz Republic : Minimum Living Standards and Alternative Targeting Methods for Social Transfers," World Bank Other Operational Studies 16087, The World Bank.
  6. David Coady & César Martinelli & Susan W. Parker, 2013. "Information and Participation in Social Programs," World Bank Economic Review, World Bank Group, World Bank Group, vol. 27(1), pages 149-170.
  7. repec:ese:iserwp:2008-35 is not listed on IDEAS
  8. Laurence Jacquet, 2006. "Optimal disability assistance when fraud and stigma matter," Working Papers, Queen's University, Department of Economics 1098, Queen's University, Department of Economics.
  9. Michel, DE VROEY, 2006. "Getting Rid of Keynes ? A reflection on the history of macroeconomics," Discussion Papers (ECON - Département des Sciences Economiques), Université catholique de Louvain, Département des Sciences Economiques 2006051, Université catholique de Louvain, Département des Sciences Economiques.
  10. repec:ese:iserwp:2006-21 is not listed on IDEAS
  11. Laurence Jacquet, 2010. "Take it or Leave it: Take-up, Optimal Transfer Programs, and Monitoring," CESifo Working Paper Series 3018, CESifo Group Munich.
  12. repec:ese:iserwp:2013-05 is not listed on IDEAS
  13. Laurence JACQUET, 2009. "Take it or Leave it : Optimal Transfer Programs, Monitoring and Takeup," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) 2009003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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