KWDI Korean Women’s Development Institute

Part 1. Analysis on individual income tax using gender perspective

The purpose of this study was to analyze the effects of individual income tax on the participation in the labor market among married women. We expected the findings would inform policy makers to make changes in current income tax system in order to increase the economic activities and employment for married women. We conducted a literature review to reveal gender inequality implicitly embedded in the current income tax system, used "National Survey of Tax and Benefit" applying control function estimator and regression discontinuity model to draw policy implications. We found that as the income tax increases, married women increase their working hours to maintain their previous income level. However, as family income increases or there are preschool children in family, there was a tendency to decrease working hours among married women. This implies that "Child Tax Credit" may compensate the cost occurred to married women who work to make their ends meet. Also, "Child Tax Credit" can stimulate the economic activities of married women in the middle class to participate in the labor market.

 

Part 2. Analysis on Earned Income Tax Credit using gender perspective

Earned Income Tax Credit(EITC) was introduced to Korea in 2006 and began to be implemented in 2008. It was intended to attract more labor market participation among low income families and to increase their income by giving tax credit if they meet certain criteria. The aim of this study was to analyze the effect of EITC using panel data named "National Survey of Tax and Benefit" on women laborers' economic activities, and to find the ways how to motivate women laborers' participation in the labor market. The findings reveal that EITC increases women laborers' participation in the labor market as the replacement effect is relatively greater than the income effect. It is suggested that the working status of both main breadwinner and secondary income earner, the number of children, and other family characteristics should be considered when setting up the criteria for EITC receipt and its application. For example, as the number of children increases, the amount of EITC may increase accordingly. And, there needs to be more specific criteria determining the amount of EITC depending on the different types of family. Lastly, the amount of EITC needs to be realistically adjusted so that it can either cover or exceed the minimum cost of living.