The Effect of City-County Consolidation in South Korea

Abstract

In 1994, the South Korean central government initiated a massive merger of city and county governments, and during the next two years, a total of 40 consolidated cities were established. Following the city-county consolidations, there has been significant debate regarding whether the local mergers achieved the desired effect. This study seeks to determine whether the technical efficiency of the consolidated governments improved following the mergers, whether their financial status improved, and whether the disparities between the urban and rural areas were reduced. The literature review in this study identifies the most significant literature and the most prominent theories pertaining governmental size and boundary. It also highlights local governmental consolidation studies previously conducted in both the U.S. and South Korea. Finally, it describes the South Korean local governmental structure, and discusses the process of the city-county consolidations that took place in South Korea from 1994 through 1995. To facilitate the research and analysis related to the city-county consolidations in South Korea, this study has identified and tests the following three hypotheses: •H1: The technical efficiency of consolidated governments improved following the city-county consolidations. •H2: The financial status of consolidated governments improved following the city-county consolidations. •H3: The disparity between urban and rural areas was reduced following the city-county consolidations. Data Envelopment Analysis (DEA), pooled regression, and a mailed survey are employed to test the three hypotheses. SPSS version 21.0, DEA-Solver, and STATA are used as the analytical tools. The research findings reveal that the South Korean city-county consolidations did not lead to an increase in the technical efficiency of consolidated government, they did not result in governmental savings or improved fiscal capacity, and they did not reduce the disparity between the urban and rural areas. Based on these findings, the study concludes that the city-county consolidations in South Korea seem to have been unsuccessful.