• Korean System Dynamics Review
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• v.12 no.4
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• pp.35-62
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• 2011

PFI(Private Finance Initiative) for suppling SOC and public facilities instead of Government Infrastructure Project introduced from 1994. BTO(Build-Transfer-Operate) project had been major type of PFI system from 1994 to 2005. But after changed the Law of PFI on SOC, the BTL project newly introduced. In BTO system, the Government retrieves the investment through the operating income, but in BTL system, the government lease the facilities. As the BTO and BTL projects are widely adopted and implemented to ease the fiscal burden of government, but it has caused the tremendous fiscal burden each year over the period operation. Therefore this study attempted to analyze the question, that is, why government fiscal burden tipping? Hence, this paper, compares the difference of business structure between BTO and BTL project and explore the vicious and virtuous business structure, with the method of circular causal loop analysis. As a result, it has shown that there are some positive feedback and negative feedback loops cause the tipping and easing of government fiscal burden.

• Land and Housing Review
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• v.2 no.4
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• pp.345-353
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• 2011

This paper is focused on the sustainability of public rental housing policy. We have analyzed the general fiscal conditions of central government, the public welfare fiscal conditions, the public expenditure on rental housing, and the Korea Land & Housing Corporation (LH) financial structure. Central government fiscal conditions is controlled by the midium-term fiscal operation plan(2010~2014) and fiscal rules. And the fiscal mandatory expenditures on welfare is increased rapidly by the expansion of beneficiaries, but the fiscal discretionary expenditures particularly on public rental housing can be gradually cut down. LH, the dominant agency responsible for affordable housing, is now confronted with financial distress accruing to excessive burden for public rental housing construction. As a result this paper, we find the discrepancy between the fiscal conditons and public rental housing policies. We suggest the fiscally sustainable rental housing policy. Firstly, the construction plan should be realized reflecting the market and fiscal conditions. Secondly, the provsion and financing system of rental housing should be rebuild within the government fiscal condtions and financial ability of LH.

• KDI Journal of Economic Policy
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• v.42 no.4
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• pp.27-58
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• 2020

This paper intends to examine the extent of the fiscal contribution of immigrants to Korea. According to this analysis, the aim is to derive implications pertaining to the direction of Korea's immigration policy as a response to fiscal problems caused by population aging. For this purpose, a macroeconomic model is designed to measure the lifetime net fiscal contribution of immigrants in Korea by visa type, age, and other characteristics. According to this analysis, the sum of the lifetime fiscal contribution for all immigrants in Korea is negative. This implies that immigration policy reforms that increase the inflow size while maintaining the current structure of the foreign population characteristics can rather worsen Korea's fiscal problems. This finding suggests that immigration policy reform may exacerbate Korea's fiscal soundness if it simply targets the maintenance of the numerical balance of the demographic structure.

• Korea journal of population studies
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• v.14 no.2
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• pp.1-17
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• 1991

While various fiscal measures have been used to influence regional capital inflow or industrial location, the effect of fiscal variables on labor mobility has been little understood. Understanding the relationship between the composition of local public and urban migration would enhance the city govenment's ability to pursue an appropriate population policy. In order to examine the potential for local public finance to be utilized as a policy tool in directing urban population growth, this paper analyzes the impact of local government financial structure on urban migration. In examining the data on local government finance and the changes in population of Korean cities during the last ten years, it was found that cities with high per capita expenditure in regional development have experienced high population growth rates. In this study migration equations were constructed using various fiscal variables such as the proportion of special account expenditures which are mostly spent for local development purposes, per capita regional development expenditure, degree of local financial independence and per capita net fiscal benefit, along with other explanatory variables. The results of regression analysis showed that city government's regional development expenditure variables have a positive effect on urban net migration and a negative effect on outmigration. Fiscal independence and per capita net fiscal benefit had mixed effects on in and out migration variables, implying that local tax burden does not consistently deter inmigration or induce outmigration. Based on the results of this study some important policy implications can be found regarding local government's fiscal policies. Those cities seeking to attract higher population inflow should make a greater effort in appropriating local expenditures for regional development purposes such as infrastructure, housing, and transportation. city governments should not be too concerned about high local tax burden or necessarily seek to enhance financial independence for these factors do not exert a clear influence on urban population growth or labor supply.

• Asian Journal of Business Environment
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• v.9 no.4
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• pp.23-28
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• 2019

Purpose - With rapid population aging in Korea, changes in the population structure will result in a rise in the fiscal burden. This paper investigates the effects of population aging on fiscal spending based on Korea's province data and country panel data from the OECD. Research design, data, and methodology - We use province-level fiscal data from Local Finance Integrated Open System and the Korean Statistical Information Service and also collect country panel data from the OECD. To investigate the relationship between population aging and fiscal expenditures, our analysis uses the fixed effects model. Results - The empirical analysis based on Korean local finance and country panel data show that population aging has a positive impact on social welfare expenditures and it also has a positive impact on spending related to children and the elderly, implying that population aging may lead to an increase in fiscal spending via an increase in social welfare expenditures and spending related to children and the elderly. Conclusion - These empirical results suggest that countries like Korea that expect to experience rapid population aging need to pay more attention to prepare for the expected increase in age-related spending in the near future.

• KDI Journal of Economic Policy
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• v.34 no.3
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• pp.31-65
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• 2012

We study the sustainability of the current fiscal policy of Korea, and the effects of the social welfare policy expansion, which has been recently discussed among the political circles, on the government budget and the generational equity, using generational accounting. We follow the generational accounting approach, considering the fact that most of the social welfare policies are the entitlement programs, which imposes the limitation of the policy maker's discretion to control the cost of their provision. The social welfare expenditure will change due to the change in the policy environments of the future, such as population aging. Therefore, we need to take into account the government cash flow of the future as well as of the present to investigate its effects on the fiscal sustainability, which implies that the national debt or the budget balance is not a proper index for the investigation. Our findings are as follows. The current fiscal policies are not sustainable, and the long-term budgetary imbalance is shown very serious. The required tax adjustment, which is defined as the percentage change of tax burden required to attain the long-term budgetary balance, is very large. Unless the level of the government expenditure is properly controlled, the tax burden and the social contribution level will rise to the untolerable level. Moreover, the expansion of the social welfare policies, which has been discussed among the political circles, will substantially increase the fiscal burden of the future generations. Even though the provision of the free lunch to the primary and the secondary school students, the free child care, and the discounted college tuition do not increase the fiscal burden much, because their magnitude at present is not large and will decrease due to the decrease in the number of the newborns and the students resulting from the fall in the fertility rate, that of the free health care service will increase tax burden of the future generations very much, because the magnitude of the government expenditure needed at present is very large and the population aging will further increase the magnitude of the health care expenditure. The findings indicate that the structural reforms, to prevent the explosive increase in the social welfare expenditure in the future, are necessary before the implementation of the welfare policy expansion. In particular, the cost control of the social transfers to the elderly needs to be made, because the speed of the population aging of Korea is among the highest in the world. The findings also indicate that the budget balance or the national debt can cause the fiscal illusion, which makes the Korean government budget look sound, even though the fiscal policy will rapidly increase the social welfare expenditure in the future, as the population ages. The generational accounting, which takes into account the cash flow of the future as well as of the present, unlike the budgetary balance and the national debt, which shows the results of the government financial activities of the past and the present, is a useful method to overcome the fiscal illusion.

• KDI Journal of Economic Policy
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• v.39 no.1
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• pp.41-82
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• 2017

This paper studies the risks associated with local finance in Korea by identifying the financial status of each local government, including the financial burdens of PPP projects, and examined governmental future burdens related to PPP projects. We reviewed all fiscal burdens associated with projects, such as, for BTL (Build-Transfer-Lease) types of projects, facility lease and operating expenses, and, for the BTO (Build-Transfer-Operate) types of projects, construction subsidies that are paid at the construction stage, MRG (Minimum Revenue Guarantee) payments and the government's share of payment. Furthermore, we compared the annual expenditures of local governments on PPP projects against their annual budgets and checked if the 2% ceiling rule could be applied.

• Journal of the Korean Regional Science Association
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• v.15 no.1
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• pp.75-92
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• 1999

In this study, the present state of fiscal crisis for local governments after IMF is analyzed, firstly. its implications Characteristics of structural reform of finance after IMF bailout in Korea are examined, secondly. Since Korea was shocked by the currency crisis at the end of 1997, its local governments have also faced fiscal difficulties. The Depression of national and local economies led to decreases in tax revenues of local governments. And these shrunken revenues led to their expenditure cuts. Many investment plans were curtailed, and ordinary expenditures were also reduced sharply. The negative influences of the currency crisis on local government's finances can be examined in terms of fiscal revenue, fiscal spending, and debt burden. As a result many local governments are now experiencing fiscal stress, and some of them are even faced with fiscal crisis although the possibility of extreme measures, such as moratoriums or bankruptcies, is very slim. This is due in part to the weight of debt in local governments' budgets having remained small since the debt of local governments has been controlled by the central government. Another reason is that, central government, which functions as a lender of last resort for the local governments, will pay the debt for them. Also, without a legal system which stipulates the adjudication of bankruptcy for municipalities in Korea, local Korean governments have no legal right to declare bankruptcy. Although not a single municipality has fallen into insolvency, yet, this trend will continue to deepen as the recession continues and may lead to a situation where manu local governments fall into virtual bankruptcy in the near future, and its effects on society, as a whole, will be serious. Therefore, measures to prevent and overcome such an extreme situation are necessary, but both short-and long-term policies should be to cope with the current fiscal crisis and to prevent the deepening of the current situation.

• Korean Journal of Social Welfare Studies
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• v.47 no.4
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• pp.217-254
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• 2016

The purpose of this study is comparing fiscal sustainability of 17 welfare states. Borrowed the concept of fiscal space to Ostry et al(2010) and Ghosh et al(2011), this study measures the fiscal sustainability in welfare states. Using data collected from 20 OECD countries from 1986 to 2013, this study attempts to evaluate the financial sustainability of each country. As a result, it is necessary that the appropriate level of tax burden is secured. Tax revenue is the funded basis for maintaining the welfare state, so increasing tax compliance to offset the negative impact of increasing welfare spending will promote social cohesion. In therms of tax structure, in accordance with the ability to pay principle, it is important to raise the equity between the source of taxation. Reducing the gap between labor and capital tax is required to achieve horizontal equity, It is also useful to utilize the financial base of the welfare state by broadening the tax base though a consumption tax. Improving the vertical equity can also make a positive contribution to the fiscal sustainability of the welfare state.

• 한국사회정책
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• v.24 no.4
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• pp.185-222
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• 2017

The purpose of this study is to investigate the effect of labor market policy on fiscal soundness of welfare state. The analysis was carried out using cross-sectional panel data regression analysis, stepwise mediating effect analysis and system GMM designed by Baron and Kenny(1986) based on the data from 1985 to 2015 for 20 OECD countries. In setting up the analysis model, this study considers the interaction effect between active and passive labor market policies as well as the time sequence of the outcomes which have been overlooked in the previous studies. The result shows that labor market policies have significant impacts on the fiscal condition of welfare states, which is measured as the levels of national debt in this study. Especially the expenditure on active labor market programs has a positive effect on improving the fiscal soundness of welfare states by promoting the employment rate. In contrast, passive labor market programs expenditure is negatively associated with employment rate growth and it exacerbates the burden of national debt in the short-term. However, when active labor market programs and passive labor market programs are combined, the negative impacts by passive pabor market policies on the fiscal soundness of welfare states are off-set. Therefore this study addresses that although the expansion of the labor market policies can be inimical to the fiscal soundness of welfare states in the short-term, in the long run, they can have effective roles in securing and promoting the fiscal soundness of the welfare states by promoting the employment rate.