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The antipoverty performance of universal and means-tested benefits with costly take-up

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  • Alari Paulus

Abstract

We assess the optimal design of transfers in the context of poverty alleviation and welfarist objectives. We extend the analytical framework of Creedy (1997) with costly benefit take-up - a common characteristics of means-tested schemes in par-ticular - to study how this affects the take-up of benefits and the optimal choice between means-tested and universal benefits. Numeric simulations reveal that take-up costs can increase social welfare and reduce poverty rates achieved with means-tested schemes by inducing people to increase their work effort. Universal benefits generally still outperform means-tested schemes on the basis of social welfare and poverty measures when these are adjusted for take-up costs.

Suggested Citation

  • Alari Paulus, 2016. "The antipoverty performance of universal and means-tested benefits with costly take-up," ImPRovE Working Papers 16/12, Herman Deleeck Centre for Social Policy, University of Antwerp.
  • Handle: RePEc:hdl:improv:1612
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    Cited by:

    1. Islam, Nizamul & Colombino, Ugo, 2017. "The Case for NIT+FT in Europe: An Empirical Optimal Taxation Exercise," IZA Discussion Papers 11147, Institute for the Study of Labor (IZA).

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    Keywords

    optimal transfers; means-testing; take-up; poverty;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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