Government Influence on the Formation of Nonprofits: A Dual Relationship Between Local Government and Local Nonprofits

This study is concerned with the frequency of the formation of nonprofits, focusing on the relationship between government and nonprofits in Korea. Assuming that the relationship between government and nonprofits would exert much influence on the formation frequency of nonprofits, this study intends to describe the relationship between them according to the change in frequency of nonprofit formation. This study considers the perspective of the dual relationship between local government and local nonprofits, and presents some different explanations for understanding the growth of the Korean nonprofit sector. Empirically, government expenditure, including nonprofit and social development subsidies, is regarded as an important factor in explaining the relationship between government and nonprofits, and panel data of government expenditure of 16 local administrations and the formation frequency of the corresponding regional nonprofits are utilized for statistical analysis. Results reveal that government subsidy turns out to exert positive effects on the formation of new nonprofits. On the other hand, government social expenditure shows negative effects on the formation of new nonprofits. According to the results of this study, it can be argued that Korean nonprofit sector development has depended in large part on the political relationship with local governments, represented by the government subsidy. In addition, concerning the delivery of public services, Korean nonprofits seem to have a supplementary relationship with local government rather than a complementary one in their growth.