Movement for Balanced Development: A Case Study of a Local Government in South Korea

Abstract

South Korea has a metropolitan area where, like major cities worldwide, the population is dense as a result of employment opportunities. To prevent economic centralization, the government has implemented policies to relocate public institutions to provincial areas, completing its basic plan for innovation cities in 2003. This case study uses the Granger causality analysis, the impulse response function, and the variance decomposition method to investigate the relations among economic growth, employment, population inflow, and tax revenue for the period 1989-2018 in Chungbuk Innovation City, South Korea. Besides evidence of Granger causality among the variables, we also find that the impulse response function and variance decomposition results produce meaningful outcomes. This indicates that Chungbuk Innovation City must increase its competitiveness through population expansion measures and by promoting the development of related industries. In a sluggish economy due to the COVID-19 pandemic, the government needs to actively promote relocation policies.