ImPRovE WP 16/12: The antipoverty performance of universal and meanstested benefits with costly take-up

We assess the optimal design of transfers in the context of poverty alleviation and
welfarist objectives. We extend the analytical framework of Creedy (1997) with
costly bene t take-up { a common characteristics of means-tested schemes in par-
ticular { to study how this a ects the take-up of bene ts and the optimal choice
between means-tested and universal bene ts. Numeric simulations reveal that take-
up costs can increase social welfare and reduce poverty rates achieved with means-
tested schemes by inducing people to increase their work e ort. Universal bene ts
generally still outperform means-tested schemes on the basis of social welfare and
poverty measures when these are adjusted for take-up costs.