Estimating and Testing a Model of Welfare Participation: The Case of Supplementary Benefits in Britain.

Evidence of incomplete participation in welfare programs is often displayed. This paper analyzes how such apparent failures to participate can be explained by the presence of random errors in assessing benefit eligibility, by income underreporting, by benefit misreporting, and by participation costs. The author applies the model to the receipts of supplementary benefits in Britain. A bivariate extension of the use of generalized residuals in testing the robustness of limited-dependent-variable models is provided and fails to reject a number of the author's stochastic assumptions. Copyright 1997 by The London School of Economics and Political Science