The Korea Local Administration Review

The purpose of this paper is to examine what factors affect the rate of recovering water costs from water price in Korean local governments. In particular, it focuses on political factors as well as supply and demand ones. For this purpose, it conducts empirical analyses employing two empirical models, that is, the fixed-effect panel regression model and the panel-corrected standard errors (PCSE) model accounting for correlation and heterogeneity in panel data.
According to empirical results, water supply rates, additional construction of water wipes, financial self-reliance, and mayor's affiliation to conservative party are significant in the both models. In particular, when a mayor is affiliated to conservative party, the rate of recovering costs is significantly lower than otherwise. In the PCSE model, in case of either a mayor's affiliation to liberal party or his/her previous occupation being a politician, the rate of recovering costs is significantly lower than otherwise. When he/she is re-elected as a mayor, however, it is significantly higher than when he/she is elected at first.