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.
|Number of pages||36|
|Journal||Journal of Economic Theory and Econometrics|
|Publication status||Published - 2021|
Bibliographical notePublisher Copyright:
© 2021, Korean Econometric Society. All rights reserved.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics