This research analyzes determinant of functional government expenditures and examines whether this government expenditure structure actually reflects fiscal demands based on social and economic conditions. On the other hand, Korea’s functional resource allocation will be compared with that of foreign countries including OECD member states through panel data analysis.

As results of this research, it is found that resource allocation in Korea has not properly reflected social and economic conditions and citizens’ preference based on these situations. However, other OECD member states except for Korea have executed resource allocation polices reflecting social and economic factors such as population structure, industrial structure, and income level.

In short, social demands for government expenditures in social security and welfare will be increased while those in economic development sector will be decreased. In addition, factors influencing government expenditures in administrative affairs will not show a big difference from current conditions.