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Why Many Eligible Individuals Choose Not to Go on Welfare

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  • Pak Wai Liu
  • Jie Zhang
  • Junsen Zhang

Abstract

This article investigates why many eligible for welfare do not participate. We show that on-the-job wage-rising potential is the key factor motivating nonparticipation. Although individuals with very low earnings and little wage-rising potential are typically welfare recipients, those with good wage-rising potential may choose to work, participate in old age, or never participate. Nonparticipation remains the best choice for eligible individuals with large wage-rising potential even if universal old-age social security is available. We will also apply this model to a comprehensive welfare system in Hong Kong.(JEL H53, I38, J31) Copyright 2005, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ei/cbi026
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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 43 (2005)
Issue (Month): 2 (April)
Pages: 385-400

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Handle: RePEc:oup:ecinqu:v:43:y:2005:i:2:p:385-400

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