Intergovernmental Fiscal Relationship for Financing Social Expenditure

Abstract

The study examines social expenditure and revenue structure of local governments by local government type and the problems in intergovernmental relationship of central government and local governments, giving policy suggestions for solving issues regarding intergovernmental financial conflict with respect to social expenditure. The locus of this study is on all 233 local governments from 2004 to 2010, and the focus is on the whole grant-in-aids of social welfare services. The result of the analysis of inequality degree in the matching burdens of local governments in social welfare service charges shows three aspects. Along with the improvement of these institutional aspect, intergovernmental fiscal relationship for financing social expenditure of central government and local government need to strengthen of earmarking in large category and to buffer the earmarking into individual business through comprehensive subsidies in social service. First, central government need to increase subsidies for programs which is considered as central government's responsibilities by national minimum standard, such as National Basic Livelihood Programs, and Child-care Subsidies except childcare services. This can be achieved by lowering matching rates for the local government and improving the differential rates of subsidy. Second, Differentiation strategy in municipalities is needed. Counties need to finance sharing through the general accounting and Borough that high proportion of social expenditure need to finance sharing differential applications by strengthening. Third, Local business depending on the nature of the local area need to introduce the comprehensive aids to strengthen local government’s discretionary power to operate with autonomy and diversity.