Does the local extinction response fund mitigate population decline? Evidence from South Korea

This study examines whether targeted intergovernmental transfers can slow local population decline. South Korea’s Local Extinction Response Fund finances locally planned projects in municipalities facing demographic contraction. Using municipality-level panel data from 2009 to 2024, we estimate a Bartik instrumental variable model that combines historical population change with leave-one-out province-year fund allocations. The estimates indicate that funding slows population decline, with positive and statistically significant effects on the economically active, young, and female populations. Analyses of project composition associate slower decline with a concentration of projects in Culture and Tourism, Childcare, and Housing. These patterns suggest that amenities, care services, and residential conditions may contribute to local demographic stability. By evaluating population outcomes under a dedicated fiscal programme, the study adds evidence on the role of intergovernmental finance in place-based revitalisation. The findings suggest that targeted intergovernmental transfers can contribute to population stability in shrinking municipalities.