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Why Many Eligible Individuals Choose Not to Go on Welfare

Author

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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.

Suggested Citation

  • Pak Wai Liu & Jie Zhang & Junsen Zhang, 2005. "Why Many Eligible Individuals Choose Not to Go on Welfare," Economic Inquiry, Western Economic Association International, vol. 43(2), pages 385-400, April.
  • Handle: RePEc:oup:ecinqu:v:43:y:2005:i:2:p:385-400
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    File URL: http://hdl.handle.net/10.1093/ei/cbi026
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    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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