Psychological Frictions and the Incomplete Take-Up of Social Benefits: Evidence from an IRS Field Experiment
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)
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Take-up of the earned income tax credit is lower among eligible individuals with low incomes compared with more well-off citizens.
“Take‐up of the earned income tax credit is lower among eligible individuals with low incomes compared with among more well‐off citizens, and findings suggest that inabilities to overcome learning costs are part of the reason for this (Bhargava and Manoli 2015).”
From Human Capital and Administrative Burden: The Role of Cognitive Resources in Citizen‐State Interactions (2020) · cites this paper as Bhargava and Manoli 2015
Inabilities to overcome learning costs are part of the reason for lower EITC take-up among eligible low-income individuals.
“Take‐up of the earned income tax credit is lower among eligible individuals with low incomes compared with among more well‐off citizens, and findings suggest that inabilities to overcome learning costs are part of the reason for this (Bhargava and Manoli 2015).”
From Human Capital and Administrative Burden: The Role of Cognitive Resources in Citizen‐State Interactions (2020) · cites this paper as Bhargava and Manoli 2015
Cites
Social Influence: Compliance and Conformity
Cialdini, R. B., & Goldstein, N. J. (2004) · Annual Review of Psychology · doi:10.1146/annurev.psych.55.090902.142015 · Cited by 6,077 · see citing works
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Income, the Earned Income Tax Credit, and Infant Health
Hoynes, H., Miller, D., & Simon, D. (2015) · American Economic Journal: Economic Policy · doi:10.1257/pol.20120179 · Cited by 551 · see citing works
A unified welfare analysis of government policies.
Hendren, N., & Sprung-Keyser, B. (2020) · The Quarterly Journal of Economics · doi:10.1093/qje/qjaa006 · Cited by 571 · see citing works
Christensen, J., Aarøe, L., Baekgaard, M., Herd, P., & Moynihan, D. P. (2020) · Public Administration Review · doi:10.1111/puar.13134 · Cited by 458 · see citing works
“…functioning directly, a number of studies have shown that people experiencing more intense poverty struggle with administrative burdens in ways consistent with our theoretical arguments and expectations (Bhargava and Manoli 2015; Brodkin and Majmundar 2010; Currie 2006; Deshpande and Li 2019).”
BackgroundResultBaekgaard, M., Mikkelsen, K. S., Madsen, J. K., & Christensen, J. (2021) · Journal of Public Administration Research and Theory · doi:10.1093/jopart/muab011 · Cited by 97 · see citing works
Racial discrimination in local public services: A field experiment in the United States
Giulietti, C., Tonin, M., & Vlassopoulos, M. (2019) · Journal of the European Economic Association · doi:10.1093/jeea/jvx045 · Cited by 96 · see citing works
- Authors
- Bhargava, S., & Manoli, D.
- Affiliations
- Carnegie Mellon University (US)
- University of Texas, Austin, Speedway Stop C3100, Austin, TX 78712 (e-mail: )
- ORCID
- Bhargava, Saurabh
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2015-11-01
- Volume
- 105
- Issue
- 11
- Pages
- 3489-3529
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W1853301790
- Cited by
- 640
- References
- 1
- Citations by year
- 2026: 55 · 2025: 66 · 2024: 86 · 2023: 86 · 2022: 74 · 2021: 57 · 2020: 47 · 2019: 54 · 2018: 49 · 2017: 29 · 2016: 25 · 2015: 8 · 2014: 2 · 2013: 1 · 2012: 1
- FWCI
- 28.53
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Decision Sciences › General Decision Sciences › Decision-Making and Behavioral Economics
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Taxation and Compliance Studies
- Social Sciences › Gender Studies › Gender, Labor, and Family Dynamics
- Keywords
- Earned Income Tax Credit, benefit take-up, information complexity, stigma, tax filers, program awareness, benefit claiming, tax audit
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