Relocation of public institutions and local public finance: Evidence from South Korea

Abstract

An extensive, large-scale relocation of public institutions occurred in South Korea in the 2010s. The local policy governing this relocation was implemented to mitigate metropolitan concentration and advance equitable regional development. The policy's ultimate goal was to bolster the fiscal foundations of local governments to facilitate regional economic self-sufficiency. This study employs a synthetic differences-in-differences methodology to analyze the repercussions of public institution relocation on local government revenue. Ultimately, our findings fail to provide unequivocal evidence of a significant impact on various local revenue streams; in fact, they indicate a decrease in total revenue per capita. This study intimates that, from a local fiscal perspective, the efficacy of local reinvigoration policies via the relocation of public institutions may be limited, underscoring the importance of implementing a range of supplementary measures to facilitate the transformation of these urban centers into self-sustaining entities. Points for practitioners: This study highlights the limitations of relying solely on large-scale relocation of public institutions to stimulate local economies in South Korea. Despite policy intentions, our findings indicate a decrease in total revenue per capita, suggesting a need for supplementary measures to foster sustainable urban development. Practitioners should consider diverse strategies beyond relocation, emphasizing holistic approaches to bolster regional economic self-sufficiency and mitigate metropolitan concentration for equitable growth.