Rational Poverty or Poor Rationality? The Take‐up of Social Assistance Benefits

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Rational Poverty or Poor Rationality? The Take-up of Social Assistance BenefitsRegina T. Riphahn The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung) supported by the Deutsche Post AG. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. The current research program deals with (1) mobility and flexibility of labor markets, (2) internationalization of labor markets and European integration, (3) the welfare state and labor markets, (4) labor markets in transition, (5) the future of work, (6) project evaluation and (7) general labor economics. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. In several countries social assistance dependence has been increasing since the 1980s. After surveying the theoretical and empirical take-up literature, this study presents estimates of recent rates of non take-up of social assistance benefits. Once methodological shortcomings of prior estimations are corrected, the results show that take-up has fallen recently and thus cannot explain the rising welfare receipt. Following theoretical predictions, the probability that a rational individual takes up social assistance increases with the expected benefit amount and duration, and falls with application cost and stigma. More than half of all households eligible for transfers under the German social assistance program did not claim their benefits.JEL Classification: I38, I32, D31

No claim, no pain. Measuring the non-take-up of social assistance using register data

“…1 4 Riihelä et al (2001) indicate that in Finland, self-employment is one of the main contributors to poverty headcounts when measured in income terms, but a small contributor for consumption-based measures. Note also that among the dichotomous indicators, home ownership (outright) has the largest marginal e¤ect, increasing the non take-up probability by 31 points, which is qualitatively and quantitatively similar to Riphahn (2001).…”

“…This is the case even though methods used are very di¤erent. For Germany, Riphahn (2001) 1997. As shown in the table, both studies …nd very high rates of non-take-up.…”

“…This is particularly relevant in our context, as housing bene…ts are also a¤ected by non-take-up (see Jäntti, 2006). 7 As in Riphahn (2001), monthly income information for each family member is constructed by combining the annual values recorded in the data with using information on the number of months spent in di¤erent labormarket situations (part-time work, full-time work, receipt of unemployment bene…t, inactivity), assuming that income levels do not change during each labor market spell. Note that, using this approach, monthly family incomes cannot be reconstructed reliably when more than one adult changes status during the year, because there is no information in these cases on the overlap of di¤erent states between di¤erent family members.…”

A New Targeting - A New Take-Up? Non-Take-Up of Social Assistance in Germany after Social Policy Reforms

“…A number of studies provide empirical evidence on the magnitude and determinants of nontake-up of SA in Germany (Riphahn, 2001;Kayser and Frick, 2001;Becker and Hauser, 2005;Wilde and Kubis, 2005;Frick and Groh-Samberg, 2007). The results on non-take-up and claiming behaviour these studies reveal refer to the old system of SA and are based on survey data collected before 2005.…”

“…Blundell et al, 1988;Riphahn, 2001;Wilde and Kubis, 2005;Frick and Groh-Samberg, 2007;Whelan, 2009). In this framework, take-up (P = 1) will be observed if the net level of utility from claiming the benefit exceeds the utility from not claiming the benefit, i.e.…”