• Journal of the Korean Regional Science Association
• /
• v.33 no.2
• /
• pp.25-37
• /
• 2017

The paper is basically designed to investigate how regional consumption affects to regional income in Korea by introducing a model with panel cointegration, rational expectation and FM-OLS cointegration methodology. Empirical evidence reveals that the regional income could be stimulated by manipulating the regional consumption due to the fact that current regional consumption and first-lagged regional income are positively related to the level of regional income. Although there exists a possibility to increase the regional income which is associated with a spending multiplier in the group of regions with highly calculated MPC, but not in the groups of regions with middle and low calculated MPCs. To this end, it could be tentatively concluded that market-oriented system should be implemented elaborately to enable that the spending multipliers are appropriately operated in these two groups.