The recent growth in local school subsidies in Korea offers a chance to test the effect of
population aging on public education expenditure. In the existing literature, the
intergenerational conflict model suggests a negative effect, although a growing number of
studies are finding theoretical and empirical evidence of a positive effect. After controlling
for the district fixed effect, the analysis of the Korean data shows that the elderly population
share has a significant positive effect on the local school subsidy per pupil. This result is
robust after instrumenting the real proportion of the elderly population by the predicted
proportion, assuming no population mobility, to handle the possible bias caused by Tiebout
sorting.