Do large cities benefit from their size? : Evidence from the general shared tax for cities in South Korea

(Purpose) The amount of the general shared tax can be determined primarily through standard financial demand, and a formula exists to calculate the amount. The majority of these factors are strongly related to population size, either directly or indirectly. Therefore, standard financial demand is likely affected by population size as well. However, large cities as subnational governments are also facing balanced regional development issues. Thus, this study explores how the population factor affects the amount of the general shared tax, as well as how large cities benefit from their population size. (Design/methodology/approach) For the analysis, we employ a panel data set comprised of 83 cities in South Korea from 2010 to 2018. (Findings) The results show that population size is negatively related to the amount of the general shared tax due to the economies of scale. However, large cities are free from the economies of scale while population can reduce the volatility of the tax amount in large cities. In addition, large cities are motivated if their population is increased. (Research implications or Originality) We conclude that large cities in South Korea do not benefit from their size. In order to increase population, additional supports and incentives are necessary, especially in large cities even though they have gotten more incentives since 2022, because they have greater economies of scale than other cities, while a balanced development policy must offer more help to small and isolated cities.