Simulating the Reform of Means-Tested Benefits with Endogenous Take-Up and Claim Costs

32 Pages Posted: 8 May 2006

See all articles by Stephen Pudney

Stephen Pudney

University of Essex - Institute for Social and Economic Research (ISER)

Ruth Hancock

University of Essex - Department of Health and Human Sciences

Holly Sutherland

University of Essex - Institute for Social and Economic Research (ISER)

Abstract

Microsimulation models are commonly used to examine the distributional impact of reforms of the means-tested benefit system. Take-up behaviour is related to the level of entitlement, so reform may induce changes in take-up. We develop a stochastic simulation method and apply it to a probit model of 'income support' take-up by the UK pensioners. The method allows us to adjust net income for the welfare losses because of tangible or intangible claim costs. Endogenous take-up and claim costs both have an important impact on the simulated outcomes of the policy reform.

Suggested Citation

Pudney, Stephen and Hancock, Ruth and Sutherland, Holly, Simulating the Reform of Means-Tested Benefits with Endogenous Take-Up and Claim Costs. Oxford Bulletin of Economics & Statistics, Vol. 68, No. 2, pp. 135-166, April 2006. Available at SSRN: https://ssrn.com/abstract=889815 or http://dx.doi.org/10.1111/j.1468-0084.2006.00156.x

Stephen Pudney (Contact Author)

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

Ruth Hancock

University of Essex - Department of Health and Human Sciences ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Holly Sutherland

University of Essex - Institute for Social and Economic Research (ISER) ( email )

Wivenhoe Park
Colchester CO4 3SQ
United Kingdom

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