The Welfare Effects of Asset Means-Testing Income Support

Arbeitspapier

This paper quantitatively determines the asset limit in income support programs which minimizes consumption volatility in a lifecycle model with incomplete markets and idiosyncratic earnings risk. An asset limit allows allocating transfers to those households with the highest utility gains from extra consumption. Moreover, it serves as substitute for history and age dependent taxation. However, a low limit provides incentives for high school dropouts to accumulate almost no wealth. Consequently, they miss self-insurance and suffer from high consumption volatility. For an unborn, these effects are optimally traded-off with an asset limit of $145000.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 8838

Classification and Topics

• Classification: Wirtschaft ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs ; Retirement; Retirement Policies
• Subject: means-tested programs ; public insurance ; incomplete markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Wellschmied, Felix
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/108718
• Last update: 10.03.2025, 11:44 AM CET