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Endogenizing take-up of social assistance in a microsimulation model a case study for Germany

  1. Jürgen Wiemers  Is a corresponding author
  1. Institute for Employment Research (IAB), Germany
Research article
Volume 8(2) Autumn 2015
Cite this article as: J. Wiemers; 2015; Endogenizing take-up of social assistance in a microsimulation model a case study for Germany; International Journal of Microsimulation; 8(2); 4-27. doi: 10.34196/ijm.00115
1 figure and 8 tables

Figures

Figure 1
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Simulation of welfare entitlements in the IAB-STSM.

Source: Bruckmeier and Wiemers (2011).

Tables

Table 1

Rates of non-take-up of social assistance 2005–2011

Non-take-up Rate 95%-Confidence Interval
2005 48.0 [43.6–52.5]
2006 42.6 [38.6–46.6]
2007 40.8 [36.7–44.9]
2008 45.3 [40.7–49.9]
2009 38.6 [33.8–43.4]
2010 38.8 [33.4–44.1]
2011 42.8 [37.8–47.8]
Pooled 42.4 [40.7–44.1]

  1. Weighted non -take-up rates in percent. Source: GSOEP years 2005–2011, pooled data, IAB-STSM

Table 2

Marginal effects on probability of take-up (dependent variable).

Model 1 Probit Model 2 IV Probit Model 3 RE Probit
Simulated monthly benefit (in 100 EUR) .0718*** .0627*** .0745***
(.0016) (.0062) (.0023)
Single .0463*** .0444*** .0278
(.0144) (.0150) (.0244)
Single parent .0529** .0780*** .0506
(.0217) (.0277) (.0358)
Family with children .0112 .0353 .0123
(.0242) (.0299) (.0371)
Number of children aged < = 3 years .0545*** .0699** .0696**
(.0205) (.0230) (.0289)
Number of children age > 14 years −.0410*** −.0345** −.0360*
(.0124) (.0138) (.0184)
HHH retired −.0161 −.0528* .0063
(.0195) (.0306) (.0315)
Disability of HHH .0579 .0588 .1059**
(.0385) (.0402) (.0522)
High qualif. HHH (ref.: med. qual.) −.1322*** −.1375*** −.1824***
(.0158) (.0168) (.0271)
Low qualif. HHH (ref.: med. qual.) .0302** .0420*** .0568***
(.0128) (.0151) (.0216)
Age of HHH .0045*** .0053*** .0042***
(.0004) (.0007) (.0007)
Male HHH .0233** .0310** .0371**
(.0110) (.0124) (.0187)
Home owner household −.1715*** −.1961*** −.2275***
(.0166) (.0224) (.0280)
Rural area (ref.: interm. area) .0369** .0367** .0437
(.0155) (.0162) (.0272)
Metrop. area (ref.: interm. area) −.0016 −.0002 −.0039
(.0111) (.0116) (.0186)
Eastern Germany .1375*** .1447*** .1816***
(.0115) (.0126) (.0200)
EU migrants −.0946*** −.1035*** −.0594
(.0347) (.0374) (.0626)
Non-EU migrants .0111 .0199 .0323
(.0215) (.0231) (.0365)
Migrants with German citizenship .0114 .0156 .0213
(.0137) (.0147) (.0223)
Observations 5960 5960 5960
Wald test of exogeneity: 㱲2(1) 2.88*
(Pseudo)log-likelihood −2749.99 −17327.596 −2369.8414
ρ .717

  1. Source: GSOEP 2005–2011, own calculations. HHH stands for head of household. Wave-dummies included in all models. Standard errors in parentheses.

  2. *

    p < 0.1.

  3. **

    p < 0.05.

  4. ***

    p < 0.01.

Table 3

Effects of changing social assistance by 100 € per month on finances and caseloads for different assumptions on take-up. Simulation of endogenous take-up based on pooled IV probit.

Change monthly SA by + 100 € −100 €
Take-up 100% TU ETU ETU 100% TU ETU ETU
Share of sunk costs N/A 0 1 N/A 0 1
Caseloads (HH in 1,000)
Social assistance +1,222 +600 +581 −1,143 −528 −333
Housing benefit −506 −336 −338 +856 +561 +558
Enh. child benefit −87 −87 −87 +118 +118 +118
Annual costs in m €
Social assistance (base amount) +6,540 +6,184 +6,157 −5,112 −4,852 −4,467
Social assistance (housing) +4,654 +3,054 +2,990 −4,221 −2,784 −1,945
Housing benefit −449 −356 −358 +1,350 +1,029 +1,029
Enh. child benefit −220 −220 −220 +405 +405 +405
Total effect in m € +10,525 +8,662 +8,569 −7,578 −6,202 −4,978

  1. Notes: A negative sign for the annual total fiscal effect implies a budget surplus.

    HH = households, TU = take-up, ETU = endogenous take-up.

  2. Source: Own calculations based on SOEP 2005–2011.

Table 4

Components of net household income in the IAB-STSM.

Income components Determined in tax and transfer module?
1 Earned income no
+ Self-employed income no
+ Capital income no
+ Rental income no
+ Other incomes (pensions) no
2 − Social security contributions yes
− Income tax yes
− Alimony payments yes
3 + Child benefit yes
+ Child-raising allowance yes
+ Unemployment benefits yesa
+ Federal student support, stipends, claims to maintenance, widow’s allowance, maternity allowance, reduced hours compensation no
4 + Housing allowance yes
+ Children’s allowance yes
+ Social assistance for employable persons (SGB II) yes
+ Social assistance for unemployable persons (SGB XII) yes
= Net household income yes
  1. a

    Endogenous if labor supply reactions are considered. Otherwise we use reported unemployment benefits.

    Source: Bruckmeier and Wiemers(2011).

Table 5

Proxy variables of utility and costs and their expected effect on the probability of claiming SA.

Utility from SA Claiming costs Effect
Degree of needs Duration of needs Inform. costs Stigma/fear
Calculated monthly benefit (cont.) + +
Singles (ref.: couple without children) + + +
Single parent (ref.: couple without children) + + − +
Family with children (ref.: couple without children) + + ?
Number of children aged < = 3 years + + +
Number of children aged > 14 years − − −
HHH retired + + + ?
Disability of HHH + + − +
High qualif. HHH (ref.: med. qual.) − − ?
Low qualif. HHH (ref.: med. qual.) + + ?
Age, age2 of HHH + + + ?
Male HHH + −
Home owner household − + −
Rural area (ref.: interm. area) + + + ?
Metropolitan area (ref.: interm. area) − − − ?
Eastern Germany + + +
EU migrants + + + + ?
Non-EU migrants + + + + ?
Migrants with German citizenship + + + + ?

  1. Note: Column “effect” indicates the expected effect of the respective variable on the probability of claiming SA. A “+” sign in the utility columns corresponds to a positive expected effect on the probability of take-up, while a “+” sign in the cost columns has the opposite effect (vice versa for “-” signs). A “?” stands for an ambiguous overall effect. “HH” stands for household.

  2. Source: Based on Bruckmeier and Wiemers (2011).

Table 6

Means of covariates used in the regression by take-up status, pooled sample 2005–2011.

Non-take-up-households Take-up-households
Calculated monthly benefit (in €) 292 662***
Singles 0.56 0 44***
Single parents 0.12 0.21***
Family with children 0.10 0.16***
Number of children aged < = 3 years 0.07 0.15***
Number of children aged > 14 years 0.16 0.24***
HHH retired 0.18 0.08***
Disability of HHH 0.02 0.02
High qualif. HHH (ref.: interm. qual.) 0.22 0.08***
Low qualif. HHH (ref.: interm. qual.) 0.23 0.31***
Age 43.38 44.60***
Male HHH 0.43 0.43
Home owner household 0.18 0.07***
Rural area (ref.: interm. area) 0.12 0.15***
Metropolitan area (ref.: interm. area) 0.40 0.39
Eastern Germany 0.31 0.46***
EU Migrants 0.03 0.02**
Non-EU-Migrants 0.07 0.09*
Migrants with German citizenship 0.19 0.20
Dummy 2006 0.17 0.17
Dummy 2007 0.16 0.16
Dummy 2008 0.16 0.14*
Dummy 2009 0.13 0.15
Dummy 2010 0.11 0.11
Dummy 2011 0.13 0.16
Sample size 2810 3150

  1. Source: GSOEP, authors’ own computations based on IAB-STSM. Stars denote rejection of the E-test on equal means of non-take-up vs. take-up households with the significance levels.

  2. *

    p < 0.1.

  3. **

    p < 0.05.

  4. ***

    p < 0.01. HHH = head of household. The sample sizes add up to the number of observations used in the take-up estimations, 5960.

Table 7

Effects of changing social assistance by 100 € per month on finances and caseloads for different assumptions on take-up. Simulation of endogenous take-up based on pooled probit.

Change monthly SA by +100 € −100 €
Take-up 100% TU ETU ETU 100% TU ETU ETU
Share of sunk costs N/A 0 1 N/A 0 1
Caseloads (HH in 1,000)
Social assistance +1,222 +639 +591 −1,143 −623 −346
Housing benefit −506 −329 −331 +856 +540 +533
Enh. child benefit −87 −87 −87 +118 +118 +118
Annual costs in m €
Social assistance (base amount) +6,540 +6,490 +6,433 −5,112 −5,036 −4,558
Social assistance (housing) +4,654 +3,318 +3,169 −4,221 −3,210 −2,053
Housing benefit −449 −350 −353 +1,350 +1,027 +1,028
Enh. child benefit −220 −220 −220 +405 +405 +405
Total effect in m € +10,525 +9,238 +9,029 −7,578 −6,814 −5,178

  1. Notes: A negative sign for the annual total fiscal effect implies a budget surplus.

  2. HH = households, TU = take-up, ETU = endogenous take-up.

  3. Source: Own calculations based on SOEP 2005–2011.

Table 8

Effects of changing social assistance by 100 € per month on finances and caseloads for different assumptions on take-up. Simulation of endogenous take-up based on RE probit.

Change monthly SA by +100 € −100 €
Take-up 100% TU ETU ETU 100% TU ETU ETU
Share of sunk costs N/A 0 1 N/A 0 1
Caseloads (HH in 1,000)
Social assistance +1,222 +637 +620 −1,143 −561 −344
Housing benefit −506 −335 −337 +856 +561 +557
Enh. child benefit −87 −87 −87 +118 +118 +118
Annual costs in m €
Social assistance (base amount) +6,540 +6,326 +6,305 −5,112 −4,915 −4,512
Social assistance (housing) +4,654 +3,246 +3,190 −4,221 −2,925 −2,003
Housing benefit −449 −355 −357 +1,350 +1,028 +1,029
Enh. child benefit −220 −220 −220 +405 +405 +405
Total effect in m € +10,525 +8,997 +8,918 −7,578 −6,407 −5,081

  1. Notes: A negative sign for the annual total fiscal effect implies a budget surplus.

  2. HH = households, TU = take-up, ETU = endogenous take-up.

  3. Source: Own calculations based on SOEP 2005–2011.

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