The Korea Local Administration Review

The purpose of the study was to analyze the effects of the revenue structure of local governments in Korea on net surplus using general method of moment(GMM). The results are as follows.
It was found that the higher the local tax ratio, the higher the net surplus ratio. The analysis showed that grants lowered the net surplus ratio in the case of lower level local governments, but not for upper level local governments.
In the case of lower level local governments, it was found that the higher the proportion of unconditional and categorical grants, the lower the ratio of net surplus. For upper level local governments, the effect of the categorical grant on the net surplus ratio was same as in the case of lower level local governments, but higher unconditional grant ratio led to higher net surplus ratio. The analysis showed that the debt lowered the net surplus ratio for both upper and lower local governments.
It was found that election-related control variables had no effect on the net surplus ratio. In addition, it was analyzed that the net surplus of the previous year increased the net surplus of the current year in the case of lower level local governments, but some analysis models of upper level local governments showed the opposite effect.