ABSTRACTS
Dissertation: Three Essays on Information Asymmetry and Welfare Benefits
Chapter 1. Using Time and Essential Components to Mitigate Information Asymmetry within Welfare Benefit Programs
This paper investigates the effect of information asymmetry within the welfare programs and the approach to reduce the effect. Means-tested welfare programs are prone to moral hazard problems. For example, some individuals reduce their labor supply so that their income level meets the income threshold requirement. These individuals are likely to be those whose income are slightly above threshold. Eventually, they may increase their payoff but create information asymmetry problem such that government may not be able to differentiate the individuals who are truly eligible from those who reduce the labor supply to be eligible. Using a signaling game model and incorporating income-related ordeals (i.e. required-hour and essential component) as the signals may help government differentiate the individuals, solve the information asymmetry, increase the social welfare and, at the same time, maintain the fact that all eligibility requirements are income-related.
Chapter 2. Inter-Jurisdictional and Dynamic Information Asymmetry within Welfare Benefit Programs
This paper investigates the effect of information asymmetry within the welfare programs when benefit applicants have choices of where and when to apply and how to mitigate the asymmetry. Jurisdiction differential in net benefit might induce a migration from a low to a high net benefit jurisdiction. Likewise, individuals might choose to procrastinate on the application process if they found that applying later could give higher net benefit than applying now. As a result, these migration and procrastination behaviors create the information asymmetry problem. Using a signaling game model that incorporates these behaviors gave a solution to the information asymmetry problem. The result shows that there after accounting for application time and essential component, the individuals have no incentive to migrate or procrastinate on the application process in order to be eligible for the benefit.
Chapter 3. Conditional Double-Signal (CDS) Approach as an Efficient Approach to Welfare Benefit Targeting
This paper evaluates the solution to information asymmetry when maintaining a particular take-up rate is also the government’s objective. Imposing ordeal (i.e. double-signal) in the welfare system is expected to improve government policy directing the benefit to the needy. However, this imposition might reduce the number of applicants which, in turn, reduce the take-up rate. Conditioning on any particular take-up rate that the government aims to achieve, the imposition will help government distinguish the types of applicants without harming the take-up rate. The models are designed in such a way that they give flexibility to government in achieving any desired take-up rate. This paper also provides a simulation to evaluate the impacts of the conditional double-signals on the size of benefits, size of cutoffs and take-up rate and shows how the welfare targeting efficiency may be improved. Using 2013 U.S. state level data, the model predicts that altering the cutoff levels may change the take-up rates anywhere between 0.008 and 9.233 percentage points. This range represents the total number of marginal individuals who are in the programs. This shed some light on what particular cutoff level of ordeals a government should impose so that it does not harm the targeted take-up rates.
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FUTURE RESEARCH
In the future, I plan to do four kinds of research. Firstly, although most of my research has been theoretical in nature and the inference is made based on a simulation, looking forward, I anticipate extending my research on two respects: how the result would be if the simulation is based on the characteristics of individuals residing in a very poor area, a moderate poor area, a light poor area, generous-in-benefit areas/countries, or less generous-in-benefit areas/countries; and how field experiments may give a better understanding of information asymmetry and applicants’ behavior. Secondly, I plan to do an empirical work on the information asymmetry in ambulance industries in the United States to see the difference in behavior of insured and non-insured potential patients. Particularly, to see how likely they are going to use the ambulance service, how soon they can have the medical treatment, and how ambulance industry can create externalities on the insured and the non-insured potential patients. Thirdly, I plan to continue my work on college dropouts, income inequality and people migration. Particularly, I will focus on jurisdictions that are very poor concentrated and very rich concentrated as well as on jurisdictions that offer favorable school quality and unfavorable school quality. Then I plan to bring it into an international context. In particular, I want to see what particular public policies (e.g. access to education and health services) that cause individuals to migrate from one country to another. Which policy cause the most and the least effect? How long will the individuals stay in that country as an effect of a particular policy? Fourthly, I plan to a research on the use of EBT card to examine the behavior and the potential number of ineligible recipients of welfare benefits.