Soft-Budget Constraints and Local Expenditures
AbstractThis paper investigates how the soft budget constraint with grants from the central government to local governments tends to exaggerate inefficient local expenditures. We first develop a theoretical model, which explains soft budget problem in a multi-government setting. We then show that in Japan's case local governments implemented inefficient public investments and hence the bad outcome of soft budget problem occurred in the 1990s.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-422.
Date of creation: May 2006
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