Cash Transfer Programs and Behavioral Change: An Analysis of Policy Effectiveness and Implications

Abstract

Since the economic crisis in the late 1990s, social welfare spending in Korea has increased rapidly, and cash transfer programs have expanded even more swiftly in response to the COVID-19 pandemic. While Korea’s cash transfer programs were once focused primarily on ensuring the livelihood of vulnerable groups, there has recently been a rise in universal benefit programs aimed at addressing demographic challenges such as low birth rates and population aging. From the perspective of fiscal sustainability, it is now necessary to evaluate the effectiveness and appropriateness of these programs. In particular, while universal benefits such as Child Allowances or Baby Bonus clearly provide additional household income through public transfers at the micro level, it remains unclear whether these programs are achieving their originally intended goals. Against this backdrop, the present study aims to empirically examine whether cash-based welfare programs—such as Baby Bonus, the Child Allowances, and EITC—are meeting their intended objectives. Through this analysis, the study seeks to derive common policy implications for major cash transfer p