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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. 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., vol. 22(3), pages 581-598.
  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 9815, Faculty of Economics, University of Cambridge.
  3. Duclos, Jean-Yves, 1995. "Modelling the take-up of state support," Journal of Public Economics, Elsevier, vol. 58(3), pages 391-415, November.
  4. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
  5. repec:ese:iserwp:2006-12 is not listed on IDEAS
  6. Marlene Kim & Thanos Mergoupis, 1995. "The Working Poor and Welfare Recipiency," Economics Working Paper Archive wp_151, Levy Economics Institute.
  7. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  8. Sutherland H, 2003. "The take-up of Income Support by pensioners: estimates from POLIMOD using the Family Resources Survey," Microsimulation Unit Research Notes MU/RN/42, Microsimulation Unit at the Institute for Social and Economic Research.
  9. repec:ese:emodwp:em9-01 is not listed on IDEAS
  10. 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, vol. 53(3), pages 327-365, March.
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Citations

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Cited by:
  1. Laurence Jacquet, 2010. "Take it or Leave it: Take-up, Optimal Transfer Programs, and Monitoring," CESifo Working Paper Series 3018, CESifo Group Munich.
  2. repec:ese:iserwp:2007-13 is not listed on IDEAS
  3. repec:ese:iserwp:2006-21 is not listed on IDEAS
  4. repec:ese:iserwp:2013-05 is not listed on IDEAS
  5. 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.
  6. Olivier Bargain & Herwig Immervollz & Heikki Viitamäkix, 2007. "How Tight are Safety-Nets in Nordic Countries? Evidence from Finnish Register Data," Working Papers 200727, Geary Institute, University College Dublin.
  7. David Coady & César Martinelli & Susan W. Parker, 2013. "Information and Participation in Social Programs," World Bank Economic Review, World Bank Group, vol. 27(1), pages 149-170.
  8. Laurence Jacquet, 2006. "Optimal disability assistance when fraud and stigma matter," Working Papers 1098, Queen's University, Department of Economics.
  9. Tomer Blumkin & Efraim Sadka & Yoram Margalioth, 2008. "The Role of Stigma in the Design of Welfare Programs," Working Papers 0806, Ben-Gurion University of the Negev, Department of Economics.
  10. Michel, DE VROEY, 2006. "Getting Rid of Keynes ? A reflection on the history of macroeconomics," Discussion Papers (ECON - Département des Sciences Economiques) 2006051, Université catholique de Louvain, Département des Sciences Economiques.
  11. Laurence JACQUET, 2009. "Take it or Leave it : Optimal Transfer Programs, Monitoring and Takeup," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009003, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  12. repec:ese:iserwp:2008-35 is not listed on IDEAS
  13. Franziska Gassmann, 2013. "Kyrgyz Republic : Minimum Living Standards and Alternative Targeting Methods for Social Transfers," World Bank Other Operational Studies 16087, The World Bank.

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