Welfare Stigma or Information Sharing? Decomposing Social Interactions Effects in Social Benefit Use

Empirical research has shown that social interactions affect the use of public benefits, thus providing evidence in favor of the idea of “welfare cultures.” In this paper we take the next crucial step by separately identifying the role of social stigma and information sharing in welfare participation, using Census data. We argue that the stigma vs. information distinction has possibly important consequences. Separate identification exploits the asymmetry between association and mere spatial proximity: we asume that while information is transmitted within groups, stigma works across groups as well. We also allow for heterogeneity of social effects across different race-ethnic groups and find non-trivial differences. We find that while the information channel is more important than stigma, White Americans appear to perceive stigma more from otherWhite Americans than by other races, and Black and Hispanic Americans appear to respond principally to stigma from external groups