Using Gini coefficients of financial independence rates(FIR) and financial
autonomy rates(FAR), this paper analyzes the effects of the general
intergovernmental grants on fiscal equalization. The main findings are as
follows. First, in all types of local governments but autonomous districts, the
Gini coefficients of FIRs have been stable since mid-2000. The coefficients of
FARs which include general grants are much lower than those of FIRs. The
coefficient of the autonomous districts’ FARs is bigger than those of the other
governmental types and shows a rapidly increasing trend. Second, the paper
decomposes the differences in the Gini coefficients between FIRs and FARs
into gap-narrowing and reranking components, and presents that the trends of
the sizes of each component are largely unstable. The reranking components
in provinces or autonomous districts are rather small but those in counties are
large enough to dominate the gap-narrowing components. These results
provide some policy implications that the fiscal equalization scheme among
metropolitan areas has to be strengthened and that an overall reform of the
intergovernmental transfer system is needed in order not to reverse the fiscal
capacities of local governments.