Minki Kim, Universität Mannheim
The Impacts of Negative Income Tax on Labor Market and Health Outcomes: Evidence from a Large Scale Field Experiment
with Hyuncheol Bryant Kim, Jungmin Lee, Seung-hun Lee, and Sangyoon Park
We evaluate the effects of a large-scale randomized negative income tax experiment in Seoul, South Korea. Monthly cash transfers to low-income households over a two-year period significantly increased total household income and expenditures on essential goods and services, including food and healthcare.
However, the program lowered employment rates among recipients relative to the control group. Mental health initially improved following transfer receipt, but these gains attenuated over time. We calibrate a quantitative general equilibrium life-cycle model and compare alternative program designs through policy simulations. Our model predicts that a nationwide scale-up of the experiment would reduce income and consumption inequality but lower aggregate output, driven by income effects on labor supply and reduced precautionary savings.