The Effect of earned income tax credit (EITC) eligibility change in 2014 on working poor's labor market outcomes

Abstract

This research analyzes the effect of the policy change in Earned Income Tax Credit (EITC) eligibility in 2014 on the beneficiaries’ labor market outcomes. To this end, Waves 5-14 (2009-2018) of Korea Welfare Panel Study (KoWePS) data are used to conduct a Difference-in-Differences analysis. This study examines whether EITC achieved its new policy objectives put forward in the program revision in 2014. In the full sample, compared to the control group, the treatment group increased the probability of getting a job by 8.68%p and the annual working hours by 264.5 hours after the policy expansion and revision. Overall, the policy change in 2014 had a statistically significant positive effect on the EITC beneficiaries. However, this study finds mixed effects depending on different specifications. Among female beneficiaries, the policy change in EITC eligibility had a statistically significant positive effect on their annual working days and hours. Among male beneficiaries, it had a statistically significant positive effect on their daily working hours, their labor market participation, and employment.