Place-Based Fiscal Transfers and Sustainable Regional Development: Delayed and Uneven Effects of Korea’s Special Account for Balanced Development

Place-based fiscal transfers are widely used to promote sustainable regional development, yet their effects may vary across territories with different economic structures, fiscal capacities, infrastructure endowments, and absorptive capacity. This study examines Korea’s Special Account for Balanced Development (SABD) using panel data for 226 basic local governments. Baseline feasible generalized least squares estimates indicate a negative contemporaneous association and a positive one-year lag-effect association with per capita gross regional domestic product, with the latter substantially larger in metropolitan areas. Annual Global Moran’s I statistics reveal persistent positive clustering in local economic performance and current-year SABD, while clustering in the lag-effect measure is episodic. Fixed-effects spatial lag, spatial error, and Spatial Durbin models identify statistically significant spatial dependence, but the local current-year and lag-effect SABD coefficients become statistically insignificant. The Spatial Durbin model identifies only marginally positive indirect and total lag-effect associations, and cross-lag tests provide no evidence that the SABD lag-effect measure predicts subsequent per capita GRDP after local and year effects are controlled. The results therefore support a cautious interpretation: the baseline temporal and territorial pattern is descriptively important, but it is not sufficient to establish a causal or spatially robust local growth effect. Sustainable balanced-development finance should combine need-based allocation with local capacity building, spatial coordination, and multidimensional evaluation encompassing economic performance, demographic resilience, and public-service accessibility.