Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment - American Economic Association
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American Economic Review
November 2015
Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment
American Economic Review
ISSN 0002-8282 (Print)
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ISSN 1944-7981 (Online)
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Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment
Saurabh Bhargava
Dayanand Manoli
American Economic Review
vol. 105,
no. 11, 					November 2015
(pp. 3489–3529)
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Article Information
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)
Citation
Bhargava, Saurabh, and Dayanand Manoli.
2015.
"Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment."
American Economic Review
105 (11):
3489–3529.
DOI: 10.1257/aer.20121493
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JEL Classification
C93
Field Experiments
D91
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
H24
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
M38
Marketing and Advertising: Government Policy and Regulation
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