최신자료
The Earned Income Tax Credit and the Tax-benefit Link of Public Pensions
한국은행은 근로소득 공제와 세제혜택을 연계시킨 공적연금을 분석하는 보고서를 발표했다.
- Over the life cycle, the labor market participation induced by the Earned Income Tax Credit (EITC) during working age increases not only current earnings but also pension benefits after retirement through the tax-benefit link of public pensions. Furthermore, if potential EITC beneficiaries do not perceive this future return on current labor participation, informational interventions could enhance the EITC’s effects on labor earnings. This paper studies the role of the dynamic labor supply return built into public pensions in the EITC’s long-term impact. To this end, we develop an incomplete markets life-cycle model with the pension tax-benefit link and calibrate it to the Korean economy. We find that, for newborns with low lifetime income, the dynamic return accounts for more than 20% of the welfare gain from the EITC.
- Over the life cycle, the labor market participation induced by the Earned Income Tax Credit (EITC) during working age increases not only current earnings but also pension benefits after retirement through the tax-benefit link of public pensions. Furthermore, if potential EITC beneficiaries do not perceive this future return on current labor participation, informational interventions could enhance the EITC’s effects on labor earnings. This paper studies the role of the dynamic labor supply return built into public pensions in the EITC’s long-term impact. To this end, we develop an incomplete markets life-cycle model with the pension tax-benefit link and calibrate it to the Korean economy. We find that, for newborns with low lifetime income, the dynamic return accounts for more than 20% of the welfare gain from the EITC.
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