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Trends in the regional allocation of public investment in the post-bubble Japanese economy

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  • Mitsuhiko Kataoka

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Abstract

With reference to the assumptions presented by Yamano and Ohkawara (J Reg Sci 40:205–229, 2000 ) on the specification of a production function with region-specific individual effects on public capital, this paper introduces a new benchmark index in order to analyze the Japanese government’s investment allocation policy across subnational regions, with an emphasis on efficiency, equity, and/or redistribution under trade-off restrictions. This index, termed the equity–growth allocation share of public investment herein, is derived from a conventional Solow growth accounting approach. Specifically, it is defined as a region’s share of the periodic change in the nation’s public capital, where its growth contribution with its interregional spillover effects to overall output growth is the same across subnational regions. We apply this index to the post-bubble Japanese economy, which was beset by efficiency–equity trade-offs between Tokyo’s unipolar development and balanced growth given a prolonged recession. We find a shift from a pro-efficiency to a non-pro-efficiency allocation policy in the mid-1990s. This finding therefore rules out the inference that the government chose an inverse policy direction thereafter and instead implies that it rather attempted to balance efficiency and redistribution. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Mitsuhiko Kataoka, 2014. "Trends in the regional allocation of public investment in the post-bubble Japanese economy," Letters in Spatial and Resource Sciences, Springer, vol. 7(3), pages 205-212, October.
  • Handle: RePEc:spr:lsprsc:v:7:y:2014:i:3:p:205-212
    DOI: 10.1007/s12076-013-0112-9
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    File URL: http://hdl.handle.net/10.1007/s12076-013-0112-9
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    References listed on IDEAS

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    1. Fumitoshi Mizutani & Tomoyasu Tanaka, 2010. "Productivity effects and determinants of public infrastructure investment," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 44(3), pages 493-521, June.
    2. Daniel Albalate & Germà Bel & Xavier Fageda, 2012. "Beyond the efficiency-equity dilemma: Centralization as a determinant of government investment in infrastructure," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 599-615, August.
    3. Mitsuhiko Kataoka & Takahiro Akita, 2003. "Regional Income Inequality in the Post-War Japan," ERSA conference papers ersa03p480, European Regional Science Association.
    4. Norihiko Yamano & Toru Ohkawara, 2000. "The Regional Allocation of Public Investment: Efficiency or Equity?," Journal of Regional Science, Wiley Blackwell, vol. 40(2), pages 205-229, May.
    5. de la Fuente, Angel, 2004. "Second-best redistribution through public investment: a characterization, an empirical test and an application to the case of Spain," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 489-503, September.
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    More about this item

    Keywords

    Public investment; Spillover effects; Efficiency–equity trade-off; Japan; N95; O23; R11; R53;

    JEL classification:

    • N95 - Economic History - - Regional and Urban History - - - Asia including Middle East
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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