Ideology, intergovernmental transfers, and public health spending: Evidence from South Korea

Abstract

This paper asks whether political ideology affects local government policies through intergovernmental transfers. When local governments depend on intergovernmental transfers, and the upper-tier grantor government has a limited ability to target resources at the local level, the grantor government may use transfers to indirectly promote local public goods that reflect its political ideology. Using data from 226 South Korean municipalities within 15 regions, we show that municipalities located in regions with left-wing regional governments receive significantly more health subsidies from the regional government than those located in regions with right-wing regional governments. The increase in health subsidies leads to greater municipal health spending. Our findings are consistent with the view that party and ideology influence local government policies.