Asset Testing in Social Transfer and Welfare Programs in High-Income Countries: A Systematic Review

Pietro Valetto and Ive Marx

No 7ha9w_v1, SocArXiv from Center for Open Science

Abstract: Asset tests are widely employed to ensure that welfare resources are targeted efficiently and equitably to people that do not have the resources to be self-sufficient. This paper looks at how asset testing in social welfare programs works in the European Union and the United States and reviews the evidence on the consequences of asset testing for eligibility and behavior. For that purpose, we follow the PRISMA guidelines for study selection and synthesis, systematically reviewing 22 peer-reviewed studies published between 2014 and 2024, covering the United States and European Union, to assess the impact of asset testing. Our review finds that the real-world implementation of asset tests often undermines their stated goal of poverty reduction. While asset tests can improve targeting, they frequently discourage savings, perpetuate financial insecurity, and create administrative barriers that reduce participation among the most vulnerable. Hard thresholds incentivize dissaving and trap households in precariousness and long-term dependency, while administrative complexity often offsets any efficiency gains. Recent policy reforms-including higher thresholds, inflation-indexing, and asset exemptions-offer promising alternatives, but a persistent tension remains between targeting efficiency and poverty alleviation. We conclude that graduated approaches rather than straight disqualification better align welfare eligibility with the goals of financial resilience and poverty reduction. (Stone Center on Socio-Economic Inequality Working Paper)

Date: 2025-11-07
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:7ha9w_v1

DOI: 10.31219/osf.io/7ha9w_v1

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