The Korea Local Administration Review

The effect on the local fiscal imbalance by type of local government can be different depending on what resources are used in the local fiscal expansion policy. A comprehensive analysis on the effects of each revenue source on local fiscal imbalance can be used as basic data for such policy discussions. This study measured the contribution of horizontal fiscal imbalances by revenue source according to the type of local government by decomposing the average Shapley value of the Gini coefficient based on 2016-2019 Financial Yearbook of Local Government settlement data and analyzed their time-series changes and correlations. As a result of the study, it was found that the proportion of each revenue source and its contribution to the fiscal imbalance vary according to the type of local government and the change over time. Local governments with a relatively high share of their own financial resources in total revenue and a relatively high contribution to inequality from their own resources seem to have a stronger tendency to use the local shared tax and central government subsidy in the direction of alleviating inequality in their own financial resources. The implications obtained by analyzing the results are as follows. First, there is a possibility of expanding local finances without aggravating the fiscal imbalance through the increase of tax revenues of local government. Second, metropolitan governments have the capacity to alleviate the financial imbalance between cities and counties through the metropolitan grant reform. Third, in the process of fiscal decentralization, the state of fiscal imbalance of local governments varies depending on whether to increase the metropolitan tax or the local tax.