The welfare cost of means-testing: pensioner participation in income support

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%.