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Optimal disability assistance when fraud and stigma matter

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  • Laurence, JACQUET

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

I study the optimal redistributive structure when individuals with distinct productivities also differ in disutility of work due to either disability or distase 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 stigme. However, tagging is costly and imperfect. In this context, I show how the level of the per capital cost of monitoring relative to labor 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 compensage for distate for work.

Suggested Citation

  • Laurence, JACQUET, 2006. "Optimal disability assistance when fraud and stigma matter," Discussion Papers (ECON - Département des Sciences Economiques) 2006052, Université catholique de Louvain, Département des Sciences Economiques.
  • Handle: RePEc:ctl:louvec:2006052
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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. Sean Slack & David Ulph, 2014. "Optimal Universal and Categorical Benefits with Classification Errors and Imperfect Enforcement," Discussion Paper Series, Department of Economics 201411, Department of Economics, University of St. Andrews.
    3. 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.

    More about this item

    Keywords

    Tagging; Disability; Benefit; Fraud; Stigma;

    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

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