Explaining benefit take-up behavior – the role of incentives and habits

Take-up of social benefits is a central issue in poverty alleviation and fiscal evaluations of policy reforms. However, it is difficult to find exogenous variation in the benefit level, and little is therefore known about takeup responses to basic financial i ncentives. We exploit large and plausibly random variation in levels of ”flat rate parental leave benefits”, which all Swedish parents are entitled to. There are no financial reasons to leave money on the table, but take-up is nevertheless imperfect. Higher benefits substantially increase claiming across the income distribution. We further detect sizeable spill-over effects on subsequent take-up of low-income earners.