Abstract
As the Earned Income Tax Credit(EITC) massively expanded in 2019, 20% of total households benefit from the credit. Due to this large reform, we expect that any future reform will also largely affect the aggregate economy; thus, the heterogeneous agent life cycle dynamic stochastic general equilibrium (HA-LC-DSGE) model will be widely used in future research. This paper re-views the EITC reforms in Korea since the first implementation and surveys the previous studies, examining the labor supply effects. We address why the HA-LC-DSGE model is necessary to examine the current EITC system in Korea. Then, we provide an example of the HA-LC-DSGE model with a policy sim-ulation of the EITC expansion and explain the model’s salient ingredients to understand the results.
Original language | English |
---|---|
Pages (from-to) | 80-115 |
Number of pages | 36 |
Journal | Journal of Economic Theory and Econometrics |
Volume | 32 |
Issue number | 1 |
State | Published - 2021 |
Keywords
- Earned Income Tax Credit
- General Equilibrium
- Heterogenous Agent Model
- Labor Supply
- Life Cycle
- Precautionary Saving