Incomplete Take-up Research Articles

Replicator Evolution of Welfare Stigma: Welfare Fraud vs. Incomplete Take-Up

There are two important problems in welfare benefit programs: the prevalence of welfare fraud, in which ineligible people receive welfare benefits, and incomplete take-up, whereby eligible poor people are reluctant to claim welfare benefits. This study investigates both of these opposing phenomena using simple replicator models of statistical discrimination and the tax-payer resentment view welfare stigma suggested by Besley and Coate (1992). We find multiple stable equilibria in the long run, one of which entails low welfare fraud and 100% incomplete take-up and the other of which entails high welfare fraud and complete take-up in either model, and, moreover, that an interior stationary equilibrium that allows for the coexistence of welfare fraud and incomplete take-up is unstable in the model of statistical discrimination view welfare stigma, but it is stable in the model of the tax-payer resentment view welfare stigma. This difference arises from the different nature of stigma cost functions in these two models.

DOES INFORMING EMPLOYEES ABOUT TAX BENEFITS INCREASE TAKE-UP? EVIDENCE FROM EITC NOTIFICATION LAWS

Incomplete take-up of the Earned Income Tax Credit (EITC) is a source of persistent policy concern, with an estimated one-fifth of eligible households failing to claim the credit. To promote take-up, a growing number of jurisdictions require employers to provide EITC information to employees. We study the effect of these requirements, linking state and time variation in the adoption of the notification laws to administrative tax data. Our preferred specification yields precise null effects on EITC claiming, filing behavior, and labor force participation. The results cast doubt on the effectiveness of the notice requirements as implemented and suggest further research into other avenues for increasing tax benefit take-up.

A low-cost information nudge increases citizenship application rates among low-income immigrants.

We show that an information nudge increased the rate of American citizenship applications among low-income immigrants eligible for a federal fee waiver. Approximately half of the 9 million naturalization-eligible immigrants qualify for a federal programme that waives the cost of the citizenship application for low-income individuals. However, take-up of this fee waiver programme remains low1-3. Here we use a randomized field experiment to test the effectiveness of a low-cost intervention (a 'nudge') that informed low-income immigrants about their eligibility for the fee waiver. We find that the information nudge increased the rate of citizenship applications by about 8.6 percentage points from 24.5% in the control group to 33.1% in the treatment group (ordinary least squares regression with robust standard errors (d.f. = 933); P = 0.015; 95% confidence interval ranged from 1.7 to 15.4 percentage points). We found no evidence that the nudge was less effective for poorer or less educated immigrants. These findings contribute to the literature that addresses the incomplete take-up of public benefits by low-income populations4-10 and suggest that lack of information is an important obstacle to citizenship among low-income immigrants who demonstrate an interest in naturalization.

Does Informing Employees About Tax Benefits Increase Take-Up?: Evidence From EITC Notification Laws

Incomplete take-up of the Earned Income Tax Credit (EITC) is a source of persistent policy concern, with an estimated one-fifth of eligible households failing to claim the credit. To promote take-up, a growing number of jurisdictions require employers to provide EITC information to employees. We study the effect of these requirements, linking state and time variation in the adoption of the notification laws to administrative tax data. Our preferred specification yields precise null effects on EITC take-up, filing behavior, and labor force participation. The results cast doubt on the effectiveness of the notice requirements as implemented and suggest further research into other avenues for increasing tax benefit take-up.

Welfare Reform and the Labor Market

This article reviews the basic theoretical models that are appropriate for analyzing different types of welfare reforms, as well as the related empirical literature. We first present the canonical labor supply model of a classical welfare program and then extend this basic framework to include in-kind transfers, incomplete take-up, human capital, preference persistence, and borrowing and saving. The empirical literature on these models is presented. The negative income tax, earnings subsidies, US welfare reforms with features that differ from those in other countries, and childcare reforms are then surveyed in terms of both the theoretical models and the empirical literature surrounding each.

Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment

We address the role of “psychological frictions” in the incomplete take-up of EITC benefits with an IRS field experiment. We specifically assess the influence of program confusion, informational complexity, and stigma by evaluating response to experimental mailings distributed to 35,050 tax filers who failed to claim $26 million despite an initial notice. While the mere receipt of the mailing, simplification, and the heightened salience of benefits led to substantial additional claiming, attempts to reduce perceived costs of stigma, application, and audits did not. The study, and accompanying surveys, suggests that low program awareness/understanding and informational complexity contribute to the puzzle of low take-up. (JEL C93, D03, H24, M38)

You Can't Make Me Do It, but I Could Be Persuaded: A Federalism Perspective on the Affordable Care Act.

The Affordable Care Act (ACA) seeks to change fundamentally the US health care system. The responses of states have been diverse and changing. What explains these diverse and dynamic responses? We examine the decision making of states concerning the creation of Pre-existing Condition Insurance Plan programs and insurance marketplaces and the expansion of Medicaid in historical context. This frames our analysis and its implications for future health reform in broader perspective by identifying a number of characteristics of state-federal grants programs: (1) slow and uneven implementation; (2) wide variation across states; (3) accommodation by the federal government; (4) ideological conflict; (5) state response to incentives; (6) incomplete take-up rates of eligible individuals; and (7) programs as stepping-stones and wedges. Assessing the implementation of the three main components of the ACA, we find that partisanship exerts significant influence, yet less so in the case of Medicaid expansion. Moreover, factors specific to the insurance market also play an important role. Finally, we conclude by applying the themes to the ACA and offer an outlook for its continuing implementation. Specifically, we expect a gradual move toward universal state participation in the ACA, especially with respect to Medicaid expansion.

Transfer Program Complexity and the Take-Up of Social Benefits

We model complexity in social programs as a by-product of the screening process. While a more rigorous screening process may improve targeting efficiency, the associated complexity is costly to applicants and induces incomplete take-up. We integrate the study of take-up with the study of rejection (Type I) and award (Type II) errors, and characterize optimal programs when policy makers choose screening intensity (and complexity), an eligibility rule, and a benefit level. Consistent with many real-world programs, optimal programs feature high complexity, incomplete take-up, classification errors of both Type I and II and, in some cases, “excessive” benefits. (JEL D04, D82, H23, I18, I38)

The Welfare Returns to Finer Targeting: The Case of The Progresa Program in Mexico

It is common in developing countries to attempt finer targeting of the benefits from social safety net programs through combining different targeting methods. We evaluate the returns to finer targeting in the context of the PROGRESA program in Mexico. This program is a prominent program in the literature reflecting the fact that it has been widely evaluated, is perceived to be well targeted, and has been used as a prototype for many other programs in the region and beyond. We also identify the relative incremental contribution of each targeting method to the overall targeting performance of the program. We find that geographic targeting dominates demographic targeting (based on linking transfer levels to demographic composition), which in turn dominates household proxy-means targeting. However, the contribution of proxy-means targeting increases substantially as the program expands into less marginal localities. Adjusting for incomplete take-up increases the targeting performance of the program only slightly.