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Identity, non-take-up and welfare conditionality

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  • Claudia Hupkau
  • François Maniquet

Abstract

We study a model in which poor individuals of different types request a service and may suffer from the discrepancy between the service provider's beliefs and their true type. The utility loss resulting from such a discrepancy is referred to as an identity cost. Types are private information but service providers ideally prefer to favour individuals considered high type. They may choose to condition social service on an observable characteristic that is correlated with types but that can be manipulated by low type individuals at a cost. We show that whether conditionality enhances social welfare depends on this cost. If the cost is too low, high type individuals refrain from requesting the service because of the resulting identity cost, bringing about a so-called non-take-up equilibrium. In this case, unconditionality of the service provision is a Pareto improvement.
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Suggested Citation

  • Claudia Hupkau & François Maniquet, 2018. "Identity, non-take-up and welfare conditionality," LIDAM Reprints CORE 2940, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2940
    Note: In : Journal of Economic Behavior & Organization, 147, 13-27, 2018
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    Cited by:

    1. Gyubeom Park & Kichan Yoon & Munjae Lee, 2021. "Regional Factors Influencing Non-Take-Up for Social Support in Korea Using a Spatial Regression Model," SAGE Open, , vol. 11(4), pages 21582440211, December.
    2. Kurita, Kenichi & Hori, Nobuaki & Katafuchi, Yuya, 2019. "Model of endogenous welfare stigma: Statistical discrimination view," MPRA Paper 96836, University Library of Munich, Germany.
    3. Pierpaolo Battigalli & Martin Dufwenberg, 2022. "Belief-Dependent Motivations and Psychological Game Theory," Journal of Economic Literature, American Economic Association, vol. 60(3), pages 833-882, September.
    4. Kenichi Kurita & Nobuaki Hori & Yuya Katafuchi, 2022. "Stigma model of welfare fraud and non‐take‐up: Theory and evidence from OECD panel data," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(3), pages 310-338, September.
    5. Germain, Antoine, 2023. "Basic income versus fairness: redistribution with inactive agents," LIDAM Discussion Papers CORE 2023022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Kino, Shiho & Nishioka, Daisuke & Ueno, Keiko & Saito, Masashige & Kondo, Naoki, 2022. "Changes in social relationships by the initiation and termination of public assistance in the older Japanese population: A JAGES panel study," Social Science & Medicine, Elsevier, vol. 293(C).

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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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