The Korea Local Administration Review

Decisions on policy compliance by the target groups for policy are made by expected net benefits. Such decisions, however, may be made according to negativity bias by placing higher value on damages than profits. Therefore, assuming that there is also a negativity bias in local governments' compliance with the incentive system for local shared tax which means that local governments also have higher level of policy compliance with penalties than with incentives within the tax, this study conducted analysis on this through survival analysis. As a result, study verified that the penalty could work as a better means of inducing policy compliance than the incentive at a statistically significant level, which suggests that negativity bias may play a role in local governments’ policy compliance.