2009 EITC payment-applicable households based on their income in 2008 are total 310,000 households and it is estimated that 150 billion won will be need for it every year. However, introduction of the current EITC faced many problems in connection with other social welfare system as well as conflict between efficiency and poverty reduction objectives. In this situation, it is not too much say that EITC was implemented without sufficient discussion on single childless women, single mothers and the connection with female labor market.
Since the EITC payments have not yet been generated, this study empirically analyzes the influence of EITC implementation on female participation in the labor supply decision making and labor supply hours.
For the purpose of testing, the study applied ‘2SLS Method’ and ‘Probit Method’. Korean welfare panel data suggest and analyzed the impact of EITC on labor supply responses on the participation and hours worked. Since EITC is provided by household unit, the case that the spouse does not have any income and the case that the spouse does not exist are separately analyzed.
According to the simulation results, if EITC is implemented, female labor market participation and hours worked would be increasing. However, after separating female group as I mentioned above, there is a tendency that women whose couple's aggregating income is under 17 million won enlarge labor market participation and hours worked while EITC does not show any effectiveness when a spouse does not have any income and single childless women. Therefore, it is desirable that household unit should be segmented as single childless women, single mothers and two-paycheck couple and provision of payments should be differential.？
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