Stigma model of welfare fraud and non-take-up: Theory and evidence from OECD panel data

This paper tries to challenge two puzzles in the welfare benefit program. The first puzzle is 'non-take-up welfare' which means poor people do not take-up welfare. Second, in some developed countries, the benefit level is high, but the recipients ratio is low, in contrast, the others have lower benefit levels but higher the recipients ratio. We present a model of welfare stigma where there coexist both non-take-up and welfare fraud in the equilibrium. It shows the possibility the recipients ratio decreases as the benefit level increases in the comparative statics. Our empirical results is consistent with our theoretical result.