The Korea Local Administration Review

This paper investigates the impact of the establishment of Sejong City on local employment in neighboring areas. Using data from the National Business Survey for the period 2006-2018, the study treats the establishment of Sejong City as an intervention and estimates its employment effects. The main findings are as follows. First, the establishment of Sejong City led to a statistically significant increase in employment within Sejong City, while it did not have a significant impact on employment in surrounding areas. Second, private sector employment in Sejong City also showed a significant increase, particularly in the service sector. This provides empirical evidence that the influx of public institutions into Sejong City created new demand, which translated into private sector job growth. Third, there was no significant change in manufacturing employment within Sejong City. However, some neighboring areas experienced a significant increase in manufacturing employment. The substantial population growth in Sejong City led to increased demand for services and higher real estate prices, reducing the incentive for manufacturing firms to locate in Sejong City. Instead, these firms likely chose to establish themselves in neighboring areas with relatively lower real estate prices.