Earned income tax credit and heterogenous agent dynamic stochastic general equilibrium model

Jong Suk Han, Sun Bin Kim, Yongsung Chang

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

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 languageEnglish
Pages (from-to)80-115
Number of pages36
JournalJournal of Economic Theory and Econometrics
Volume32
Issue number1
StatePublished - 2021

Keywords

  • Earned Income Tax Credit
  • General Equilibrium
  • Heterogenous Agent Model
  • Labor Supply
  • Life Cycle
  • Precautionary Saving

Fingerprint

Dive into the research topics of 'Earned income tax credit and heterogenous agent dynamic stochastic general equilibrium model'. Together they form a unique fingerprint.

Cite this