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American Economic Journal: Economic Policy: Vol. 3 No. 1 (February 2011)

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Transfer Program Complexity and the Take-Up of Social Benefits

Article Citation

Kleven, Henrik Jacobsen, and Wojciech Kopczuk. 2011. "Transfer Program Complexity and the Take-Up of Social Benefits." American Economic Journal: Economic Policy, 3(1): 54-90.

DOI: 10.1257/pol.3.1.54

Abstract

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)

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Authors

Kleven, Henrik Jacobsen (London School of Economics and Political Science)
Kopczuk, Wojciech (Columbia U)

JEL Classifications

D04: Microeconomic Policy: Formulation; Implementation; Evaluation
D82: Asymmetric and Private Information
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
I18: Health: Government Policy; Regulation; Public Health
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs

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