Local Managerial Strategies for External Versus Own Source Fiscal Resources

Abstract

Although empirical evidence abounds on the determinants of intergovernmental transfers in the decentralized context, not many studies focus on the career and educational characteristics of local elected administrators. As local governments around the world are assuming increasingly more revenue authorities and expenditure responsibilities where local administrators play the role of managers as well as politicians, examining how local fiscal strategies are formulated is of critical importance for designing and managing intergovernmental fiscal relations. Utilizing fiscal data on Korean local governments from 2007 through 2010, this article provides some evidence that local governments with elected administrators who have previous business careers are less effective in securing external subsidies, but better at raising revenues from their own sources, relative to those with political experience. We also report that local administrators who graduated from the nation’s top universities are substantially more capable of attracting subsidies. Our findings suggest that local managers’ individual characteristics are an integral component of the game between the central and subnational governments in the distribution of intergovernmental transfers.