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Kilkon Ko, Hyunwoo Tak and Daejoong Kim. (2014) The Analysis on the Existence and the Factors of Welfare Trap in Korean Financial Support Programs for Job Creation. Korean Policy Studies Review 23(1). 99-125.
This study examines whether a welfare trap exists in “Korean Financial Support Programs for Job Creation,” and analyzes the causes and policy implications of this potential welfare trap. Despite the challenges that welfare traps pose for job creation programs, preceding works have mainly focused on the economic impact of the program based on employment rate. These have neglected to present thoughtful empirical study regarding the existence and causes of the welfare trap in the program. While conducting this study, we built a database of support programs for job creation containing 3,305,173 people (2005-2011) from the government’s il-moa system, and utilized it to conduct analyses, with modification. From this data, we determined the existence of the welfare trap by measuring the degree of repetitive participation in the same program, and the degree of overlapping participation in multiple programs for a long period of time. Also, we examined the causes of the welfare trap through regression analysis using program participant characteristics as an independent variable. The result shows that 49,258 people (approximately 1.5% of total participants) remained in the program for more than 1,000 days. This implies that repetitive participants and overlapping participants do exist. However, from the factor analysis on participants who have fallen into the welfare trap, we find double-peak distribution, particularly in youth and the elderly, meaning that an identical welfare trap can emerge with different results according to the characteristics of participants. The analysis of major participating programs by different age groups supports this result as well. This suggests that repetitive and overlapping participation in financial support programs for job creation is not necessarily an unfavorable welfare trap, and also has the positive effect of supporting social security not guaranteed by private labor market.
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