Basic Report

Republic of Korea’s social welfare national subsidy programs are recently facing quantitative expansion and qualitative changes. The existing national subsidy programs for social welfare were the factors that intensified the rigidity of local finance, especially to a local government with weak fiscal conditions.
  
   This paper suggests improving the inter-governmental cost-sharing system on social welfare national subsidy program with the focus on the child welfare program. In particular, this paper reviews the issues related to standard and differential subsidy rate and analyses four different scenarios for each standard and differential subsidy rate to draw the best alternative scenario. Infant child care subsidy program and child allowance program are selected as analysis cases since they account for a large proportion among 13 child welfare programs and are applied both standard and differential subsidy rate.
  
   The paper finds that the standard subsidy rate is desirable to be increased by 10% from the current subsidy rate of two programs, while the average and the standard deviation of financial independence ratio and social welfare expenditure index are the most appropriate criteria for differential subsidy rate.
  
   Meanwhile, all of child welfare national subsidy programs are stipulated in a way that the central and local governments jointly carry out the programs and share the costs. However, both the central and local governments are difficult to have autonomy and responsibility for the programs under the current structure. Therefore, it is recommended to gradually raise the standard subsidy rate for cash-based welfare programs such as infant child care and child allowances so that the central government will ultimately take charge of them. On the other hand, social service programs such as caring service are needed a local transfer so that the local governments can autonomously operate based on the local contexts.