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About half of individuals who are eligible to social assistance do not claim the benefit they are entitled to. We examine the role of informal transfers on welfare participation. Individuals are embedded within a fixed social network which may provide financial support to the network members they care about. Decision to participate depends on private transfers flowing from the network and on social stigma associated to participation. The social stigma is assumed to be a fixed cost common to all individuals while informal transfers depend on both the wealth of the receiver and of the network. Using the German SOEP data, we estimate the structural model and the effect of private transfers on welfare participation. We provide micro-fundations and estimates for crowding-out in the context of social assistance.
