Functional Estimates Of Japanese Government Domestic Expenditures, Fiscal 1952–1963

The purpose of the paper is to describe current and constant price estimates of Japanese central and local government postwar domestic expenditures by economic type and function recently completed by Miss Yoshiko Kido, International Christian University, Tokyo, and myself. The rationale of the functional classification is to estimate those government expenditures which enhance the economy's productive capacity. Expenditures are divided into four broad functional categories: developmental, disaster repair and prevention, social welfare, and general government. These four categories are subdivided to two levels of disaggregation. We were able to break down government fixed investment, government enterprise inventory investment, current domestic transfers and subsidies into 42 functional components. For constant price series, each functional component by economic type was deflated by separate price indexes. We followed the Economic Planning Agency's procedure for the official national accounts of assuming no productivity change in the provision of government services. Our results are generally comparable to the official national accounts estimates. The major difference is that we attribute considerably more fixed investment to local governments, and correspondingly less to the central level. Government expenditures had the following characteristics. Growth was rapid; in real terms the public sector use of the economy's resources in 1963 was 2.2 times more than in 1952. The elasticity of government expenditures to GNP was unity in current prices, slightly less in real terms. The government postwar share in GNP has been smaller than in European nations and, unlike them, was not rising. This reflects the underlying growth strategy of emphasis upon private business fixed investment. Government consumption expenditures declined relative to GNP, and investment rose. Developmental expenditures comprised the largest share (40–45 per cent) of the government total. The elasticities to GNP of government expenditures by economic and functional categories are provided and discussed. A simple test was made of the cyclical relationship of government expenditures (both total and by category) to GNP. The results suggest that government expenditures, rather than contra‐cyclical, were pro‐cyclical in effect.