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Optimal disability assistance when fraud and stigma matter

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  • Laurence Jacquet

    (Université Catholique de Louvain)

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://qed.econ.queensu.ca/working_papers/papers/qed_wp_1098.pdf
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Bibliographic 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
Date of revision:
Handle: RePEc:qed:wpaper:1098

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Keywords: Tagging; Disability benefit; Fraud; Stigma;

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References

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  1. Currie, Janet, 2004. "The Take-Up of Social Benefits," IZA Discussion Papers 1103, Institute for the Study of Labor (IZA).
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Cited by:
  1. 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.
  2. 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.

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