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Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment

Saurabh Bhargava () and Dayanand Manoli ()

American Economic Review, 2015, vol. 105, issue 11, 3489-3529

Abstract: We address the role of "psychological frictions" in the incomplete take-up of EITC benefits with an IRS field experiment. We specifically assess the influence of program confusion, informational complexity, and stigma by evaluating response to experimental mailings distributed to 35,050 tax filers who failed to claim $26 million despite an initial notice. While the mere receipt of the mailing, simplification, and the heightened salience of benefits led to substantial additional claiming, attempts to reduce perceived costs of stigma, application, and audits did not. The study, and accompanying surveys, suggests that low program awareness/understanding and informational complexity contribute to the puzzle of low take-up. (JEL C93, D03, H24, M38)

JEL-codes: C93 D03 H24 M38 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20121493
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