Simulating the Reform of Means-tested Benefits with Endogenous Take-up and Claim Costs
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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Volume (Year): 68 (2006)
Issue (Month): 2 (04)
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