The Korea Local Administration Review

This study presents new methods to enforce the impact of modification coefficient of the Local Shared Tax allocation method to Korean local government. Because the Local Shared Tax allocation to local government is defined to enforce fiscal balance among local governments regards to reducing the cost of the public administration of each government. However, in fact, there has been a question on the significance of those which the coefficients multiplied to the standard administration demand. In this study, I analyze the modification coefficient of the grant allocation process and present two different alternative methods to enforce the function of the coefficient. Additionally, it provides the empirical evidence of the alternatives to improve the positive impact to the fiscal balance of each local government.

□ Keywords: Local Shared Tax, Standard administration demand, Modification coefficient