Should Unified Korea Choose Fiscal Decentralization for Education? Testing the Decentralization Theory on Education Finance with Cross-country Analysis for Korean Unification

Abstract

The unification of South Korea and North Korea is a plausible idea yet it requires a comprehensive preparation in advance. As a method to achieve fiscal efficiency in public services, decentralization theory1 is consistently applied. However, the current literature and political reality argue that decentralization does not always hold its efficiency. Therefore, this paper focuses on finding an ideal education finance model for post-unification Korea by studying how one country’s academic/economic status is related to their education finance model. This paper conducts the OLS linear regression analysis with 40 OECD and its partner countries’ information on GDP per capita, Gini Index, PISA mathematics score, and the form of education finance system. The main findings of this research are that the political and fiscal decentralization are different ideas, and fiscal decentralization does not always hold its efficiency as the decentralization theory states. Among the types of decentralization, the optimal education finance model for academic and economic improvement is deconcentration – which is a combination of fiscal centralization and political, or administrative, decentralization to empower regional autonomy.