The Korea Local Administration Review

This empirical study examined the relationship between local economicgrowth and local government investment expenditures in South Korea usingpanel data. The dependent variables regarding local economy are the local productof Agriculture/Forestry/Fishing, Mining/Quarrying/Manufacturing, Construction,Services, G.R.D.P. and the local labor(employed persons). The independentvariables are four local government investment expenditures, such as the localexpenditures of Education/Culture/Tourism, Agriculture/Forestry/Fishery, Industries/SMEs(Small and Medium enterprises) and Transportation/National Land/RegionalDevelopment. Panel unit root tests and panel cointegration tests are performedand then various panel VAR/VECM are analyzed with Granger causality tests.The results indicated that there are various cointegration relationships andGranger causalities between local economic growth or local labor and the localexpenditures of Agriculture/Forestry/Fishery or Industries/SMEs. But there is norelationship between local economic growth or local labor and the localexpenditures of Education/Culture/Tourism or Transportation/National Land/Regional Development.
□ Keywords: Panel-VAR, Panel-VECM, Granger Causality Test, Local GovernmentInvestment Expenditure, Local Product, Local Employment