중앙과 지방정부 간 재원부담모델

An Ideal Model of Intergovernmental Fiscal Relations in Korea

This paper presents an ideal model of intergovernmental fiscal relations based on the normative theory of public finance, which is readily applicable to the current grants-in-aid system in Korea. It reviews three criteria to set up the ideal system. The first criteria is to identify the level of government that should provide a public service. Borrowing the Musgravian conventional wisdom, stabilization and redistribution functions are exclusively assigned to the central government, and allocation function can be shared in intergovernmental settings. For the provision of public services with spillovers or services that do not have spillovers but for which the central government has to maintain its control because of national interests, the central government can make local government provide those services in the form of delegation with appropriate types of grants-in-aid. The remnant function can be classified as autonomous services over which local government can have much discretion and should be financed by own source revenues unless it does not have any spillovers. Hence, the types of services provided by local government can be classified into autonomous and delegated services. Second, it would benecessary to classify the types of local services into capital-intensive and labor-intensive. This classification is related with economies of, scale. Usually economies of scale are shown in capital-intensive services, such as water supply, wastewater treatment, electricity, and gas distribution, while labor-intensive services, such as police, fire, and primary and secondary education, do not. If a service is classified as capital-intensive, then it would be better to be assigned to the responsibility of upper level of government. This criterion could be supplementarily employed when to identify the level of government based on the first criteria. Third, the types of local services would be classified into services with positive spillovers and those that do not. This criterion is necessary to avoid misallocation of public resources caused by a mismatch of the range of benefit spillover and government jurisdiction. With the combination of the first and third criteria, there could be four ideal types of intergovernmental fiscal relations which is shown at table.