The Korea Local Administration Review

This study performed an empirical analysis of differences in the amount ofreturn of government subsidies by fiscal capability of local government usingpanel data. Because the subsidies to be returned may not generate utility otherthan interest revenue, they should be allocated to local governments andproperly used if possible.In this study, the returned of government subsidies in local governmentswould increase depending on their fiscal capability. Consequently, localgovernments have earned more subsidy programs based on their fiscalcapability with the motives to maximize their budget. In other words, thecurrent subsidy system is inefficient and it is necessary to improve thegovernment subsidy system for greater efficiency.
□ Keywords: Amount of Subsidy Returned, Fiscal Capability of Local Government,Inefficiency of Government Subsidy