The Korea Local Administration Review

This study is trying to analyze the impact of the economic growth on the local revenue, and to predict the extent of reduction in the revenue of local governments when the economic growth rate falls. To this end, the revenue of local governments is analyzed by dividing them into local tax revenue, local non-tax revenue(self-earning revenue) and local shared tax. Among the grants, subsidy income classified as conditional grants unlike local shared tax and local debts are excluded from the analysis.
In order to analyze the impact of economic growth on local tax revenues and local non-tax revenues, GRDP and population are used as explanatory variables. In addition, in order to analyze the effect of the economic growth rate on local shared tax, the effect of the economic growth rate on the domestic tax is analyzed. According to the analysis, if the real GRDP growth rate falls by 1%p, the local tax revenue decreases by 1.268% and the local non-tax revenue decreases by 1.515%. It also showed that if real economic growth rate falls by 1%p, domestic taxe will fall by 0.958%.
If Korea's real economic growth rate falls by 3.15% year-on-year, local tax revenue falls by 3.5816 trillion won year-on-year, while local non-tax revenue falls by 4.8599 trillion won year-on-year. It also showed that due to the falling economic growth, local shared tax falls by 270.9 billion won.