A Study on Central and Sub-national Fiscal Share in Social Expenditure

Abstract

This paper tries to investigate the intergovernmental fiscal share in social expenditure in Korea. This paper considers two things may be pre-requisite for the reform of intergovernmental fiscal share. To clarify the issue clearly, this paper starts with the classification of Social expenditure data between central and sub-national governments.

The results confirm that current fiscal share in social expenditure (SOCX and COFOG) between central and sub-national governments would be in range among OECD countries. The other thing is to investigate that “flexible fiscal share" in major projects should be expanded to all projects in sub-national level. The comprehensive analysis is explained by the relation of the population and intergovernmental transfer.

According to DID(difference in difference) empirical analysis, “flexible fiscal share" policy does not play a significant role on fiscal efficiency in sub-national level. As a result, there is no clear evidence that current fiscal share in central level should be risen. And, the reform of intergovernmental transfer. Intuitively, the contribution of the paper is to connect the relationship between population distribution and intergovernmental fiscal transfer. Academic contribution is that DID analysis attempts to find main results on central and sub-national level by using sub-national data.