Advanced Search
MyIDEAS: Login to save this paper or follow this series

Local government expenditure and council size: Quasi-experimental evidence from Japan

Contents:

Author Info

  • Hirota, Haruaki
  • Yunoue, Hideo
Registered author(s):

    Abstract

    In order to evaluate a fiscal common-pool problem, this paper focuses on the relationship between local government council size and its expenditure. Generally, local councilors internalize the benefit of public projects targeted at their political jurisdictions, but underestimate and prefer to externalize the cost of public projects due to the national subsidy system. When council sizes become larger, their expenditure might be larger because of the selfish behavior of local council members. This paper estimates the positive effect of local council size on local government expenditure using a dataset of 13,989 municipalities in Japan over a period of 6 years. In Japan, local council size is a deterministic and discontinuous function of municipal population size under legal rules. We pay attention to this exogenous discontinuity and apply a regression discontinuity design to consider an endogeneity bias. The results show that the larger the size of the local council the larger the size of expenditure they undertake. In particular, we find that growing small municipalities tend to increase their expenditures, so that for example, 1% increases in local council size lead to about 1.2% increases of expenditures by small municipalities. Our results show that the fiscal common-pool problem is produced in small municipalities.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://mpra.ub.uni-muenchen.de/42799/
    File Function: original version
    Download Restriction: no

    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42799.

    as in new window
    Length:
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:pra:mprapa:42799

    Contact details of provider:
    Postal: Schackstr. 4, D-80539 Munich, Germany
    Phone: +49-(0)89-2180-2219
    Fax: +49-(0)89-2180-3900
    Web page: http://mpra.ub.uni-muenchen.de
    More information through EDIRC

    Related research

    Keywords: fiscal common-pool problem; local council size; government expenditure; regression discontinuity design;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Persson, Torsten & Tabellini, Guido, 1999. "The Size and Scope of Government: Comparative Politics With Rational Politicians," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2051, C.E.P.R. Discussion Papers.
    2. Bradbury, John Charles & Crain, W. Mark, 2001. "Legislative organization and government spending: cross-country evidence," Journal of Public Economics, Elsevier, Elsevier, vol. 82(3), pages 309-325, December.
    3. Per Pettersson-Lidbom, 2004. "Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments," Discussion Papers, Government Institute for Economic Research Finland (VATT) 350, Government Institute for Economic Research Finland (VATT).
    4. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
    5. Gilligan, Thomas W & Matsusaka, John G, 1995. "Deviations from Constituent Interests: The Role of Legislative Structure and Political Parties in the States," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 33(3), pages 383-401, July.
    6. Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
    7. Reza Baqir, 2002. "Districting and Government Overspending," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(6), pages 1318-1354, December.
    8. Peter Egger & Marko Koethenbuerger, 2010. "Government Spending and Legislative Organization: Quasi-experimental evidence from Germany," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 2010-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    9. Bradbury, John Charles & Stephenson, E Frank, 2003. " Local Government Structure and Public Expenditures," Public Choice, Springer, Springer, vol. 115(1-2), pages 185-98, April.
    10. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
    11. Lee, Myoung-jae, 2005. "Micro-Econometrics for Policy, Program and Treatment Effects," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199267699, October.
    12. Schaltegger, Christoph A. & Feld, Lars P., 2009. "Do large cabinets favor large governments? Evidence on the fiscal commons problem for Swiss Cantons," Journal of Public Economics, Elsevier, Elsevier, vol. 93(1-2), pages 35-47, February.
    13. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 642-64, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:42799. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.