Measuring and Explaining the Limited Take-Up of the Housing Benefit in the Netherlands

It is well known that the take-up rate of the Dutch housing benefit and other means tested benefits is substantially below 100%. In order to measure non-take up one usually has to simulate entitlement to the benefits. In this paper we take a closer look at the quality of the simulation. We find evidence that simulation error is much more important than has often been assumed in earlier studies. These studies use the simulation of entitlement in order to select the sample on which an explanatory model for the take-up decision is based. Simulation error may therefore lead to biases in the explanatory analysis. Our analysis suggests that a discrepancy between the income that is reported in our database and the income on which the decision to apply for the benefit is based is an important source of simulation error.The data that were available for this study contain information about refused applications. This allows for the estimation of alternative models that can explain the decision to apply for the housing benefit independent of simulted entitlement. Estimation results for such a model differ in some important respect from that of the conventional one. Further analysis suggests that measurement errors in rent, received benefits or housing composition are also more important than had initially been thought