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The Effectiveness of Government Expenditures during Crisis: Evidence from Regional Government Spending in Japan 1990-2000

  • Markus Bruckner


    (School of Economics, University of Adelaide)

  • Anita Tuladhar

    (International Monetary Fund)

We use a rich dataset of regional government expenditures for Japan during the 1990-2000 period to estimate from within-prefecture variation the multiplier of government investment and government consumption expenditures. Our main finding is that government spending did not have multipliers effects that are on average larger than one. Government investment had a positive and significant effect on output that was quantitatively larger than the effect of government consumption expenditures. Government personnel expenditures and transfers to households had significant negative output effects while transfers to firms produced positive multiplier effects that were significantly larger than one. Our findings are consistent with macro model that emphasize the supplyside effects of fiscal policy during times of financial crisis.

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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2011-10.

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Length: 21 pages
Date of creation: Feb 2011
Date of revision:
Handle: RePEc:adl:wpaper:2011-10
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