Does sending letters increase the take-up of social benefits? Evidence from a new benefit program

Abstract

The effectiveness of transfer programs in reducing poverty and inequality can be significantly reduced if eligible individuals fail to apply for them. This paper shows that benefit take-up can be influenced by sending targeted letters to the eligible population. We exploit the implementation of the guarantee pension program in Finland, which offered a monthly top-up benefit to low-income pensioners. The Social Insurance Institution sent information on the benefit together with application forms to a portion of the eligible population a month before implementation. We find clear evidence that this simple and inexpensive intervention increased take-up and prompted pensioners to apply sooner.