The Nonparticipation Problem: Behavioral Economics and The Take-Up of Social Benefits

  • Francesca Alba The George Washington University

Abstract

The nonparticipation of low-income households in social benefit programs remains a puzzle to many economists, especially when analyzed through a neoclassical lens. For some households, the decision to participate in a government benefit program could mean the difference between living above or below the poverty line. However, behavioral economics—a branch of economics that incorporates human psychology into economic models—may provide a useful framework through which to analyze the nonparticipation of low-income households in government benefit programs. Empirical research suggests that lack of knowledge, incomplete information, hassle costs, and procrastination each play an important role in this policy problem. This paper will begin with an overview of nonparticipation in social benefit programs in the United States, describe the neoclassical theory of how low-income households maximize their utility when deciding whether to participate in such a program, contrast this neoclassical approach with implications from theory and research from behavioral economics, and end with some broad implications—taken from the research—for future policy.

Author Biography

Francesca Alba, The George Washington University
FRANCISCA ALBA is a second-year Master of Public Policy candidate at the Trachtenberg School of Public Policy and Public Administration where she is focusing on social policy. She graduated from the University of Edinburgh with a Bachelor of Arts in Economics and Sociology. Francisca interned at the Urban Institute’s Income and Benefits Policy Center and the National Association of Counties Future Lab. In addition, she spent three years working for a local, community-based organization called Martha’s Table.

ACKNOWLEDGEMENTS The author would like to thank Dr. Gerald Brock, for whose course she wrote this paper. For their thoughtful feedback and guidance, she thanks Editor-in-Chief, Jessica Burnell, Associate Editor, McCall Hopkin, and her faculty reviewer, Dr. Joseph Cordes. She also thanks her boyfriend, Walt, and her family for their support of her academic pursuits. Lastly, she thanks the Trachtenberg School for their confidence in her abilities.
Published
2018-05-11
Section
Articles