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Poverty Traps With Local Allocation Tax Grants In Japan




This essay investigates poverty traps related to Local Allocation Tax (LAT) grants in Japan. LAT grants, which are transfers of funds from the central government to local governments, make efforts for enhancing regional economic growth, due to the calculation of the LAT grants. Using a simple dynamic model, we show that LAT grants lower regional income and are a disincentive to localities to increase their estimated tax revenue. Using panel Granger (non-)causality tests, we find empirical support for asserting that there are poverty traps due to the LAT grants in Japan.

Suggested Citation

  • Takero Doi, 2010. "Poverty Traps With Local Allocation Tax Grants In Japan," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 466-487, December.
  • Handle: RePEc:bla:jecrev:v:61:y:2010:i:4:p:466-487

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    References listed on IDEAS

    1. Henrik Hansen & John Rand, 2006. "On the Causal Links Between FDI and Growth in Developing Countries," The World Economy, Wiley Blackwell, vol. 29(1), pages 21-41, January.
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    Cited by:

    1. Miyazaki, Takeshi, 2016. "Intergovernmental Fiscal Transfers and Tax Efforts: Evidence from Japan," MPRA Paper 74337, University Library of Munich, Germany.
    2. Raphael Fischer & Gunther Schnabl, 2016. "Regional Heterogeneity, the Rise of Public Debt and Monetary Policy in Post-Bubble Japan: Lessons for the EMU," CESifo Working Paper Series 5908, CESifo Group Munich.

    More about this item


    H77 ; O43 ; R11 ;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes


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