Local decentralization and economic growth in Korea

Local public finance in Korea substantially and significantly has changed for the efficient public provision after 1991 local autonomy. Policy makers are trying to find out the effect of devolution. This paper attempts to examine how local share out of national expenditure (decentralization) affects the growth of regional income. This empirical paper shows the relationship between the increase of local share out of national expenditure and the growth of regional income in Korea. The significant results confirm the connection between them. These findings indicate the transfer effect of central government may cause the regional economy to municipal level rather than province level. For the province level of governments, the finding explains the taxbenefit ratio may not affect the regional income growth.