“韓國 地方財政 收入-支出의 因果關係 分析”

The Local Government Revenues- Expenditures Nexus in Korea

This papre examines the intertemporal linkage between local government revenues and expenditures in Korea. We test the causal relationship between revenues and expenditures using the panel data of 11 provinces during 1970-89 period. The issue is whether revenues Granger-cause expenditures, or expenditures Granger-cause revenues. The main results that emerge from empirical studies are as follows. 1) Two years are sufficient to summarize the relevant dynamic interrelationships. 2) There exist feedback as well as instantaneous causality between local government revenues and expenditures. 3) There does not exist the “flypaper effect” that a dollar increase in exogenous grants monies stimulates local spending more than a dollar increase in local income in Korea. 4) We found institutional reasons why such pattern of causal relationship between the two exists. A policy implication of the results of this paper is that the role of self-financing scheme must be enhanced for a successful implementation of the local autonomy in Korea.