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The Welfare Cost of Means-Testing: Pensioner Participation in Income Support

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  • Stephen Pudney
  • Monica Hernandez
  • Ruth Hancock

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Abstract

We estimate parametric and semi-parametric binary choice models of benefit take-up by British pensioners and develop methods, based on the compensating variation, of inferring the cash-equivalent value of disutility arising from stigma or complexity of the claims process, taking account of the self-selection induced by take-up. We extend this to incorporate the claim costs borne by welfare-recipients into the measurement of pensioner poverty. We find that allowing for implicit claim costs in this way has a non-negligible impact on poverty measurement.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 03/2.

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Date of creation: Oct 2002
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Handle: RePEc:lec:leecon:03/2

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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Keywords: benefit take-up; program participation; pensions; welfare; poverty;

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References

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  1. Hernandez, Monica & Pudney, Stephen & Hancock, Ruth, 2006. "The welfare cost of means-testing: pensioner participation in income support," ISER Working Paper Series 2006-12, Institute for Social and Economic Research.
  2. Janice Halpern & Jerry A. Hausman, 1985. "Choice Under Uncertainty: A Model of Applications for the Social Security Disability Insurance Program," NBER Working Papers 1690, National Bureau of Economic Research, Inc.
  3. Klein, Roger W & Spady, Richard H, 1993. "An Efficient Semiparametric Estimator for Binary Response Models," Econometrica, Econometric Society, Econometric Society, vol. 61(2), pages 387-421, March.
  4. Marlene Kim & Thanos Mergoupis, 1998. "The Working Poor and Welfare Recipiency," Macroeconomics, EconWPA 9810006, EconWPA.
  5. 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.
  6. M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers 95-4, Brown University, Department of Economics.
  7. Ruth Hancock & Geraldine Barker, 2005. "The quality of social security benefit data in the British Family Resources Survey: implications for investigating income support take-up by pensioners," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 168(1), pages 63-82.
  8. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1023-35, December.
  9. Blundell, Richard & Fry, Vanessa & Walker, Ian, 1987. "Modelling the Take-up of Means-tested Benefits: the Case of Housing Benefits in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 98(390), pages 58-74, Supplemen.
  10. Riphahn, Regina T., 2000. "Rational Poverty or Poor Rationality? The Take-up of Social Assistance Benefits," IZA Discussion Papers 124, Institute for the Study of Labor (IZA).
  11. Duclos, Jean-Yves, 1995. "Modelling the take-up of state support," Journal of Public Economics, Elsevier, Elsevier, vol. 58(3), pages 391-415, November.
  12. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(3), pages 913-37, August.
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