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Asymmetry in the fly-paper effect of the national subsidy in Korea

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  • Sangsoo Lim
  • Sanghoon Lee
  • Pilhyun Kim

Abstract

Nowadays, Korean central government has concentrated increasing attention on welfare policy. Welfare payment which is delivered by local government relies on the national subsidy. The national subsidy, however, is a kind of conditional grants which is needed to match some financial resource of local governments. For this reason, the fiscal conditions of local governments may become worse off, as the amount of national subsidy increases. This phenomenon is called the ‘fly-paper effect’, and may be caused inefficiency of the intergovernmental grants. In this paper, we test whether there is any fly-paper effect in the national subsidy and, then, the asymmetry in the fly-paper effect.

Suggested Citation

  • Sangsoo Lim & Sanghoon Lee & Pilhyun Kim, 2017. "Asymmetry in the fly-paper effect of the national subsidy in Korea," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(4), pages 560-574, October.
    • Handle: RePEc:taf:rjapxx:v:22:y:2017:i:4:p:560-574
    DOI: 10.1080/13547860.2017.1312068
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