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The Welfare Cost of Means-Testing: Pensioner Participation in Income Support

Monica Hernandez, Stephen Pudney and Ruth Hancock
Journal of Applied Econometrics
Vol. 22, No. 3 (Apr. - May, 2007), pp. 581-598
Published by: Wiley
Stable URL: http://www.jstor.org/stable/25146532
Page Count: 18
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The Welfare Cost of Means-Testing: Pensioner Participation in Income Support
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Abstract

We estimate parametric and semi-parametric binary choice models of benefit take-up by British pensioners and use a revealed preference argument to infer the cash-equivalent value of disutility arising from stigma or complexity of the claims process. These implicit costs turn out to be relatively small, averaging about £3-4 per week across Income Support recipients. Using the Foster-Greer-Thorbecke measure of poverty among pensioners, we find that allowing for implicit claim costs incurred by benefit recipients raises the measured degree of poverty by not more than 13%.

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