Benefit Take-Up and Labor Supply Incentives of Interdependent Means-Tested Benefit Programs for Low-Income Households

Using a microsimulation model based on representative panel data, we analyze the outcomes of three major means-tested interdependent benefit programs that are available for low-income households in Germany with respect to benefit take-up and labor supply incentives. The results show a distinct overlap between the programs and high rates of non-take-up, indicating that the effectiveness of the programs in reaching their target groups could be improved. Furthermore, we find that workers from low-income households are confronted with a complex benefit structure and high marginal tax rates, which negatively affects the individual labor supply.Keywords Social assistance * Labor supply * Non-take-up * MicrosimulationJEL Classification 138 H31 C15
IntroductionWelfare programs available for low-income households usually have several goals. The most important are distributional objectives such as securing a minimum standard of living, enabling social participation and reducing poverty. [...]