The Korea Local Administration Review

This article attempts to analyze the effect of transaction cost that affectKorean local government's policy adoption. In recent, local government attemptsto cooperate with local private sector in order to provide public services. In theprocess of cooperation, interaction between local public sector and privatesector causes transaction cost. This transaction cost is important to policyadoption. Therefore, this article analyzes the role of transaction cost on policyadoption. A basic empirical model includes financial factor, political factor,neighbor government factor, and demand factor. After an analysis of basicmodel, the model including transaction cost is analyzed. The result of analysisreveal that transaction cost factor has a significant effect on policy adoption.And other factors have similar effects on policy adoption comparing with basicmodel: financial factor, political factor, and neighbor government factor. Thisresult means that local government considers transaction cost to provide publicservices.
□ Keywords: transaction cost, local government, policy adoption