The relationship between fiscal decentralization and trust in government: evidence from the South Korean case

Abstract

To date, many developing countries have continued to implement fiscally decentralized governance systems to respond to the diversified needs of local residents more effectively and to better act in line with the public interest. However, little is known about the fiscal decentralization–trust link. Focusing empirically on the South Korean case, this study examines how financially decentralized governance might increase government trustworthiness not just at the national level, but also at the local level. The results of multilevel regression and panel data analyses partly confirm the results of pro-fiscal decentralization studies in that the growth of local fiscal autonomy is positively and significantly related to public trust in government. Specifically, we find that as fiscal decentralization improves, levels of trust in local government also rise. In addition, our findings show that in terms of having higher levels of public trust in government, the impact of revenue decentralization tends to be greater than that of expenditure decentralization. This evidence implies that allowing local governments to have their own revenue sources rather than expenditure autonomy can be a way to better respond to people’s needs in the long run.Points for practitionersFirst, as fiscal decentralization improves, levels of trust in local government also rise. Second, allowing local governments to have their own revenue sources rather than expenditure autonomy can be a way to better respond to people’s needs in the long run. Third, government policies should aim to provide benefits to citizens for their own sake, such as by exercising effective delivery or improving the quality of public services and programs that are likely to be viewed positively by constituents. This could encourage citizens to engage with the current public-sector spheres in ways that affect their confidence and expectations of government policies and bureaucrats in a positive manner.