The Impact of Fiscal Factors on the Efficiency of Local Governments: Focusing on Metropolitan Cities and Special Cities in Korea

This study aims to measure the efficiency of local governments and empirically analyze its determinants. To this end, Data Envelopment Analysis (DEA) using the BCC model was applied to 17 metropolitan cities and 5 special cities in Korea over the period 2016 to 2023—a period marking the diffusion of the Fourth Industrial Revolution and accelerating regional economic transformation. The number of employees in the manufacturing sector and the year-end balance of tangible assets were used as input variables, while value-added was used as the output. DEA efficiency scores were then used as the dependent variable in a Tobit regression, with fiscal indicators such as local revenue, fiscal self-reliance ratio, fiscal independence ratio, and debt-to-asset ratio as independent variables. The results show that local revenue and the fiscal self-reliance ratio have a statistically significant positive relationship with efficiency, while the debt-to-asset ratio has a significant negative effect. Fiscal independence was found to be statistically insignificant. These findings suggest that enhancing local efficiency requires not only increased financial input but also a focus on securing predictable, sustainable financial resources and developing strategic fiscal governance. The results provide meaningful policy implications for improving local economic performance under constrained fiscal conditions.