In July 2015, South Korea’s National Basic Livelihood Security System (NBLSS) was reformed for the purposes of eliminating welfare blind spots and reducing poverty. The reform is expected to affect the recipients’ economic behaviors and choices. In this paper, we use changes in benefits and eligibility for the NBLSS under the customized benefit system to identify the effects of the NBLSS on a proposed set of economic outcomes―income, labor supply, consumption, savings, and poverty reduction. To estimate the effects, we use data from the 10th~12th waves of the Korea Welfare Panel Study and employ a difference-in-differences framework that is useful in evaluating public policies and programs. Also, we integrate the propensity scores into the difference-in-differences estimation to ensure internal validity of the difference-in-differences framework. We find that the NBLSS helps the poor to reduce financial and material hardships through income and consumption increments, while it does not provide disincentives to the recipients from participating in the labor market or from saving. The findings indicate that the NBLSS achieves its intended outcomes, although there is room for policy suggestions. The maximum cash transfers from the Livelihood Benefit, a main component of the NBLSS, are not sufficient to guarantee a minimum standard of living. The family support obligation rules for the Livelihood Benefit and the Medical Benefit should be abolished to remove welfare blind spots and reduce income poverty and inequality. Moreover, coverage and budget of the NBLSS should be expanded and made flexible, especially during an economic downturn.
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