In 2005, the government announced the relocation policy of public agencies to non-capital regions. The main purpose of the policy was to decentralize population in the SMA (Seoul Metropolitan Area) through building regional competitiveness. The transfer of 98% of the public institutions was completed in April 2017 (MOLIT 2017). However, unlike the blueprint for the initial plan for the relocation of the agencies, there may be an increase in social cost and insufficient contribution to the regional economic development.
This study empirically examines effectiveness of the policy and its impact on regional economic growth and on how differently the policy affects regions depending on the distance from the city for relocation. To measure the policy effect, I use a Difference-in-Difference (DID) model.
After analyzing the effects of the relocation of public institutions on the local economy through research models, there is a policy effect only on the Regional Gross Domestic Production (RGDP) in the target city where the innovation city is located. The model for analyzing the surrounding regions shows that there are not statistically significant effects of the policy on the real GDP and population change, indicating that the effects of public sector relocation policies are hardly visible in the surrounding area. As for the factors affecting the real GDP, the increase in the number of houses and the increase in the land price were found to affect the increase in the real GDP. However, analysis of the population change model for the target areas showed that the coefficient value of the policy effect is not statistically significant. This means that the public agency transfer policy has little impact on the population growth of the regions
