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Optimal disability assistance when fraud and stigma matter

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Author Info
Laurence Jacquet (Université Catholique de Louvain)

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Abstract

I study the optimal redistributive structure when individuals with distinct productivities also differ in disutility of work due to either disability or distaste for work. Taxpayers have resentment against inactive benefit recipients because some of them are not actually disabled but lazy. Therefore disabled people who take up transfers are stigmatized. Their stigma disutility increases with the number of non-disabled recipients. Tagging transfers according to disability characteristics decreases stigma. However, tagging is costly and imperfect. In this context, I show how the level of the per capita cost of monitoring relative to labour earnings of low-wage workers determines the optimality of tagging. Under mild conditions, despite their stigma disutility, inactive and disabled people get a strictly lower consumption than low-wage workers. The results are valid under a utilitarian criterion and a criterion which does not compensate for distaste for work.

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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1098.pdf
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1098.

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Length: 30 pages
Date of creation: Nov 2006
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Handle: RePEc:qed:wpaper:1098

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Related research
Keywords: Tagging; Disability benefit; Fraud; Stigma;

Other versions of this item:

Find related papers by JEL classification:
H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
I3 - Health, Education, and Welfare - - Welfare and Poverty

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. Currie, Janet, 2004. "The Take-Up of Social Benefits," IZA Discussion Papers 1103, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Laurence Jacquet & Bruno Van der Linden, 2006. "The Normative Analysis of Tagging Revisited: Dealing with Stigmatization," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 168-198, June. [Downloadable!] (restricted)
    Other versions:
  4. Ruth Hancock & Stephen Pudney & Geraldine Barker & Monica Hernandez & Holly Sutherland, 2004. "The Take-Up of Multiple Means-Tested Benefits by British Pensioners: Evidence from the Family Resources Survey," Fiscal Studies, Institute for Fiscal Studies, vol. 25(3), pages 279-303, September.
    Other versions:
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  6. Hugo Benitez-Silva & Moshe Buchinsky & John Rust, 2004. "How Large are the Classification Errors in the Social Security Disability Award Process?," NBER Working Papers 10219, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  16. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 1-35, February. [Downloadable!] (restricted)
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  17. Jon Harkness, 1993. "Labour Force Participation by Disabled Males in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 26(4), pages 878-89, November. [Downloadable!] (restricted)
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  19. Paul M. Romer, 1996. "Preferences, Promises, and the Politics of Entitlement," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 195-228 National Bureau of Economic Research, Inc. [Downloadable!]
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  23. Hugo Benitez-Silva & Moshe Buchinsky & Hiu Man Chan & Sofia Cheidvasser & John Rust, 2000. "How Large is the Bias in Self-Reported Disability?," Working Papers 2000-01, Brown University, Department of Economics.
    Other versions:
  24. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Tomer Blumkin & Yoram Margalioth & Efraim Sadka, 2008. "The Role of Stigma in the Design of Welfare Programs," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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