International Journal of Advanced Culture Technology

The International Promotion Agency of Culture Technology (국제문화기술진흥원)
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Identifying Cluster Patterns in Relationship Between Municipal Revenue Configuration and Fiscal Surplus: Application of Machine Learning Methodologies

  • Im Chunghyeok (Dept. of Business Administration, Inha Univ.) ;
  • Ryou Jaemin (Dept. of Global Public Administration, Yonsei Univ.) ;
  • Han JunHyun (Fiscal Performance Management Institute) ;
  • Bae Jayon (AI-RPA Center, Fiscal Performance Management Institute)
  • Received : 2024.06.05
  • Accepted : 2024.09.03
  • Published : 2024.09.30
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Abstract

Net surplus serves as a crucial indicator of how efficiently local governments utilize their resources. This study aims to analyze and categorize the patterns of net surplus across 75 local governments in Korea. By employing machine learning techniques such as K-means clustering and silhouette analysis, this research delves into surplus patterns, revealing insights that differ from those provided by traditional analytical methods. Machine learning enables a broader spectrum of discoveries, leading us to identify three distinct clusters in the net surplus of Korean local finances. The characteristics of these three clusters show that the wealthiest cities have the highest surplus ratios. In contrast, mid-sized municipalities, constrained by limited central government support and scarce local resources, exhibit the lowest surplus ratios. Interestingly, a significant number of cities maintain a median surplus ratio even under challenging fiscal conditions. Additionally, we identify critical thresholds that differentiate the three clusters: a grant-in-aid ratio of 19.31%, a debt ratio of 3.52%, and a local tax ratio of 25.58%. This identification of thresholds is a key contribution of our study, as these specific thresholds have not been previously addressed in the literature.

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