[Interview file] Let's find out the contents of the study of local currency by Se-yeon Cho, "The Foolish Institution"

There is a state-run research institute that has been furious because it has been pointed out by a leading politician in the passport, which is ranked No. 1 in preference for the next presidential power, as a “poor institution” for doing “poor research”.

It is the Korea Institute of Taxation and Finance, which was established in 1991 and celebrates its 30th anniversary next year.

The most talked-about study is <The Impact of the Introduction of Local Currency on the Local Economy>, which was published on the 15th in the Tax and Finance Brief Volume 105.

This 80-page research report is scheduled to be published next month. Prior to this, it was four months that the main contents were summarized and published together with a press release to inform and promote the research results to the media and the public.

What kind of content did it contain?

I'm curious about whether or not you're getting criticized as a'stupid study', so let's find out quickly.

The local currency issued by each local government is a system to revitalize the local economy and protect small businesses.

how?

By making it impossible to use in hypermarkets, etc., we limit the use area, and limit the use area to consume within our area.

Instead, it provides financial support for benefits such as refunds and discounts.

Budgets from both the central government and local governments are invested here, and the size of the government is increasing significantly.

This year, it has grown into a large-scale project with an issuance of 9 trillion won.

A 10% discount is given to consumers, so subsidies from the government and local governments amount to 900 billion won.

Different names are issued by local governments such as Seoul Love Gift Certificate, Gyeonggi Local Currency, Incheon eum, Ontong Daejeon, and Yeominjeon.

This honey-like local currency that everyone who knows

looks so good, but what is the problem?

First of all, Jo Se-yeon saw regional restrictions as a problem.

The sales of small business owners in our region will increase, but it will eventually become a'zero-sum game' in return for a decrease in sales in other regions.

If so, you cannot stay still in the next municipality.

Se-yeon Cho analyzed that making local currency in Sejong has the effect of inducing local governments to issue local currency accordingly by making it in Daejeon and in Cheongju.

If this happens, the sales of small business owners are zero sum in the whole country, but finance goes into this, issuance costs, management costs fly away, and the overall consumer welfare falls.

In addition, if large local governments with a lot of finances increase the amount of issuance or discount, the damage can be concentrated in local governments with small economies.

So what is the scale of that side effect?

The Ministry of Public Administration and Security determines that the cost of issuing local currency is 2% of the face value.

If it is mobile or card type, there is a financial fee, and if it is drawn with paper, it costs printing.

In a simple calculation, 2% of 9 trillion won will cost 180 billion won.

In addition, the dead-weight loss (dead-weight loss) due to government subsidies in economics was estimated at KRW 46 billion and added.

This explains that if 900 billion won is invested in financial subsidies, it should be delivered as a profit of 900 billion won, whether it is consumers or companies, but some of them disappear as net losses in the entire national economy.

In this way, Se-yeon Cho calculated the net economic loss incurred by local currency this year to about 226 billion won per year.

In this situation, the analysis result of Cho Se-yeon is that it is a problem to subsidize this policy by using the central government's treasury, even if the local government does not know.

"The best decision of the local government and the best decision of the whole country may be different." (Research Director Song Kyung-ho, Associate Research Fellow)

A question comes up asking,'Wouldn't this or that have the effect of protecting small business owners?'

In response, the research admits that "the sales of large marts can be transferred to small business owners."

As a result of analyzing the data of the National Statistical Office's total survey of businesses across the country, it was confirmed that employment and sales increase in some industries, such as local marts and grocery stores.

Research suggests that'Onnuri Gift Certificates', which have similar characteristics to local currency, but do not have regional restrictions, should be used as an alternative policy.

Onnuri gift certificates that can be used nationwide have no side effects such as distortion of profits and losses between local governments caused by regional restrictions.

It was evaluated that the cost of issuance and management was also efficiently managed by a single entity.

However, it has been provoked that government subsidies are also necessary if economic damage is concentrated in a certain period, such as Gunsan, an area of ​​employment crisis.

If the previous stories were'model analysis' based on economic assumptions, the conclusion based on the actual business entity survey could be divided into empirical analysis.

This is the use of the big data of the National Statistical Office until 2018, which was released in April of this year, but it is regrettable considering the dramatic policy expansion since last year.

Statistics for 2019, when more local currencies have been used, will have to wait until April next year, and even longer to analyze them and draw conclusions.

At the end of the report, we acknowledge the limitations of these studies and leave a back.

“Since 2019, the amount of local currency issuance has increased significantly, and the operation method has also evolved from the existing paper type to mobile type and card type. Such changes in local currency conditions have resulted in structural changes in terms of effects, and after 2019, "There is a possibility that different types of economic effects may have appeared."

He said, "If the majority of local governments introduce local currency like now, there is a possibility that the newly created value-added within the region will become smaller."

In summary,'local currency has many side effects, but there are good points, and the good point is that it can be achieved with Onnuri gift certificates, so let's activate them more.'

As a user of Sejong's local currency'Yeomin', I heard of this controversy and said, "Why is this good?"

I was angry, saying, but I thought it would be necessary to think more about this story.

The government's plan to issue local currency for next year is said to be 15 trillion won, a 67% increase from 9 trillion won this year.

Large-scale finance will also be put in.

I look forward to an active discussion on local currency policy in the next budget discussion.