It is time to improve the effectiveness of welfare expenditure to reduce the
fiscal burden due to increasing welfare demand. As one of its solution, this
study proposes increasing the autonomy of local governments in planning their
welfare-related budget and its spending. Considering the role and expertise of
central and local governments, it is desirable that the central government takes
charge of basic welfare service like public aid, and the local governments
specialize in social service that is based on local-specific welfare demand. This
study discusses the validity of the proposals theoretically and empirically.