Does revenue-sharing improve government service quality? Evidence from Seoul metropolitan districts

ABSTRACT As a way to narrow the fiscal disparity across local governments with different revenue capacity, revenue-sharing institutionalizes relatively affluent governments to transfer some revenues for the poor. However, effects of the shared revenue, for both transfer-losing and transfer-gaining governments, on individual governments’ service quality are unknown. In this study, we investigate the connection between the shared revenue and government service quality, the concept measured with tangibility, empathy, assurance, responsiveness, and reliability. Using data of 25 districts in Seoul Metropolitan Area from 2008 to 2016, our findings demonstrate the shared revenues are positively associated with all measures of government service quality.