The Korea Local Administration Review

This paper is trying to analyze characteristics of the expenditure based on the revenue structure in local governments. The decision tree model is used to analyze it with panel data of municipalities over the period 2008~2015. The local revenues are divided into local taxes, local non-taxes, grants, and subsidies and local expenditures consist of welfare-related, health-related, administrative-related, public order-related and economic-related expenditures. This paper aims to examine how the structure of the local revenue affects the expenditure of local governments in Korea.
The result shows that the structure of the local revenues affects the types of the expenditure of local governments. Especially the expenditure of the local governments is typified by welfare-related expenditure and public order-related expenditure according to the local revenue structure. Another result shows that the effect of the structure of the local revenue on the local expenditure can be different depending on the type of local governmen like Si(Cities), Gun(Counties), Gu(Districts). In the case of Si, the higher the proportion of local tax or conditional grant in local revenue, the higher the proportion of welfare-related expenditure in local expenditure. And the proportion of the expenditure related to public order is high as the share of non-local taxes is low or the share of non-conditional grant is high in local revenue. The proportion of welfare-related expenditure in Gu is higher when the proportion of local taxes or conditional grant is higher. On the other hand, the proportion of welfare-related expenditure in Gu is higher when the share of non-local tax is lower or the share of non-conditional grant is lower. The share of welfare-related expenditure is higher as the proportion of local tax or non-local tax is lower and the proportion of conditional grant is higher.

□ Keywords: decision tree analysis, local government expenditure, sources of local revenue