BACKGROUND: Previous research has observed large inequalities in the distribution of welfare benefits. The Norwegian welfare state includes several schemes that give households with children the opportunity to apply for public income support to compensate for expenses related to chronic disease. The aims of this study were to examine the geographic distribution of children receiving compensatory cash benefits because of a chronic asthma condition and to determine whether social or geographic factors account for area variations in uptake independent of the associations with need. RESULTS: Considerable variation between counties was evident, with rates of benefit uptake ranging from 10.5 recipients per 1,000 children younger than nine years in the highest-ranking county, to 1.5 per 1,000 in the lowest. It is argued that the observed area-level inequalities reflect more than variations in morbidity. In particular, the chance of receiving benefits reflects variations in the ability of street-level bureaucrats to inform families about their rights. Spatial variations also reflect, in part, the fact that families with different socio-economic standing inhabit different locations and that the threshold for receiving benefits is systematically lower for families with an academic background. CONCLUSION: To be able to refine the implementation of a welfare policy, a better understanding of the processes that generate the outcomes of the various welfare schemes and services is required. This can be achieved by adopting an approach to the study of outcomes of welfare policy that integrates both the social and geographic perspective, and that focuses on specific diagnoses or distributional procedures.