Factors affecting relief aid policy of local governments – electoral competitiveness, fiscal capacity, and severity of crisis

ABSTRACT

We examined the effects of three factors on whether and how local governments provide relief aid to their citizens in the context of the COVID-19 crisis: the demand side (electoral competitiveness), the supply side (fiscal capacity) and the severity of the crisis (the number of confirmed cases). Our findings indicate that local governments with lower electoral competitiveness chose the targeting method over the universal method. Those with stronger fiscal capacity tended to provide relief aid using the targeting method. For those in areas with few confirmed cases, the universal method was favoured. While the results for individual relief aid were consistent with those for the entire sample, the results for business relief aid were not.

KEYWORDS:

• Relief aid
• electoral competitiveness
• fiscal capacity
• crisis

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/03003930.2022.2113991

Notes

1. COVID-19 may be a transnational crisis that has the potential to disrupt normal fiscal (López-Hernández et al. 2018) and administrative (Ansell, Boin, and Keller 2010) mechanisms. However, this article focuses on the national level.

2. For example, crisis of local finances due to COVID-19: (Gordon, Dadayan, and Rueben 2020; McNichol and Leachman 2020); effects of local projects in response to crisis: Chodorow-Reich et al. (2012); local leadership: Plaček, Špaček, and Ochrana (2020); administrative system settings: Bouckaert et al. (2020); administrative capacity and legitimacy: Christensen and Lægreid (2020); path dependency: Moloney and Moloney (2020); crisis communication and shared learning: Dzigbede, Gehl, and Willoughby (2020).

3. Many prior studies (e.g., Cole, Healy, and Werker 2012; Healy and Malhotra 2009; Mader and Schoen 2019) analysed the effects of residents’ needs and voters’ preferences on government responses to crisis. Therefore, this article does not focus on this issue.

4. Statistics on the bureaucratic capabilities of Korean local governments are not available to the public. Before the pandemic, no relief aid was provided on a national basis in Korea. For these reasons, we do not examine bureaucratic capabilities or sunk costs of previous policies in this article.

5. Social assistance schemes can be codified according to three features or dimensions: target population, conditional vs unconditional assistance and transfer modality (De Wispelaere & Yemtsov 2020; Hölsch and Kraus 2004). For other aspects of social assistance schemes, see related social policy studies (e.g., Adema 2006; Gough 2001; Saraceno 2002).

6. We used Korean data in our analyses, which had the following characteristics. First, the Korean government provided relief aid nationwide during the pandemic, which allowed our analysis to be comprehensive (comprehensiveness). Second, each local government implemented various policies on relief aid. Though the central government has provided relief aid to all Korean citizens, local governments chose their policies on relief aid depending on their environments (diversity). Third, all information in our analysis was disclosed to the public or is obtainable by request for information disclosure (transparency and accessibility).

7. Prior studies on elections and government spending have been written from two perspectives (Block, Ferree, and Singh 2003): opportunistic (Nordhaus 1975; Rogoff and Sibert 1988; Rogoff 1990) and partisan (Hibbs 1977; Alesina 1987). This article is written from an opportunistic perspective.

8. The intuition behind the opportunistic political budget policy is straightforward: if voters are relatively short-sighted, or have limited information, then short-term increases in public spending, or decreases in tax collection, could be effective strategies for increasing government popularity (Nordhaus 1975; Shi and Svensson 2006; Rogoff and Sibert 1988).

9. The current reality in Korea is similar to that in prior studies. In July 2021, a few leaders of Korean local governments held a meeting about the provision of relief aid, at which they identified several problems due to the poor fiscal status of their local governments (Yonhap (News) 2021b).

10. Intergovernmental financial support is common in most countries, including Korea. Even where fiscal capacity is limited, local governments can secure the resources necessary for crisis management through intergovernmental financial support in order to provide relief aid. However, if the crisis persists or the fiscal soundness of the central government is weakened, intergovernmental financial support may be limited. Local governments with weak fiscal capacity will then have a difficult time obtaining sufficient intergovernmental financial support. If intergovernmental financial support is not sustained or sufficient, the ability of local governments with limited fiscal capacity to manage will inevitably be adversely affected.

11. In our sample, the mean ratio (2.127%) of the amount of relief aid to total expenditure in local governments choosing the universal method exceeded that (0.748%) of local governments choosing the targeting method (see Table A2 in online appendix).

12. This article examines the relationship between fiscal capacity and the method of provision of relief aid under the assumption that fiscal capacity remained constant during the pandemic. This is because other circumstances may arise. As shown by Bonaccorsi et al. (2020) for the Italian case, wealthier municipalities were more severely impacted by the lockdown measures. The authors acknowledge an anonymous reviewer’s constructive comments on this point.

13. The following three scenarios may occur: a local government uses only the universal method, it combines the universal and targeting methods, or it does not provide relief aid.

14. The following three scenarios may occur: a local government uses only targeting method, it combines the universal and targeting methods, or it does not provide relief aid.

15. In light of empirical considerations, we employed a binary variable as a measure of electoral competitiveness. If a continuous variable were employed instead, interpretation and derivation of implications may be distorted. When a continuous variable is used, a difference of 1%p in electoral competitiveness is evident. However, the difference between 1%p when the value for electoral competitiveness is in the single digits and 1%p when it is in the double digits is quite considerable. When a continuous variable is employed in the LPM, logit and probit analyses utilised in this study, the marginal effect is calculated as a function of the 1%p increase. The marginal effect should change depending on the value for electoral competitiveness, but the use of a continuous variable precludes this. On the other hand, using a binary variable captures the marginal effects that occur when electoral competitiveness increases from low (high) to high (low).

16. Along with the official local governments of Korea, we also included Sejong and Jeju in our sample. This is because the regional and local governments of Sejong and Jeju are respectively identical.

17. Findings drawn from data on the Korean cases examined herein may be relevant to other countries with comparable policy environments (see online appendix for details).

Additional information

Notes on contributors

Seungwon Yu

Seungwon Yu, PhD, is an associate professor in the Department of Public Administration, Korea National Police University, Korea. Prior to conducting research at a university, he worked for the Korea Ministry of Finance and Economy, primarily in the field of public finance. His research covers a broad range of topics, including public management, policy analysis and evaluation, and state-owned enterprises. Recently, he published an article in the International Review of Administrative Sciences. [email protected]

Suhee Kim

Suhee Kim, PhD, is an assistant professor in the Department of Urban Administration, University of Seoul, Korea. Her research focuses broadly on local government, public management, Korean politics, policy analysis & evaluation, and state-owned enterprises. Her recent article was published in International Review of Administrative Sciences. [email protected].

Yeonwoo Sim

Yeonwoo Sim is a PhD candidate in the Department of Public Administration, Korea University, Seoul, South Korea. Her research focuses broadly on public management, including policy analysis and evaluation, policy experiment, and quantitative methodology. She recently published an article in Asian and Pacific Migration Journal. [email protected]