Redistribution in Contemporary Japan: A Political Economy Analysis of Ide, Furuichi and Miyazaki (2016)'s "All for All" Fiscal Reform Proposal

This paper builds a political economy model to analyze Ide, Furuichi and Miyazaki (2016)'s "All for All" fiscal reform proposal. The main finding of the electoral competition equilibrium is that the stylized implementation of the proposal will likely increase Japan's already huge fiscal deficit and that it will only appease social cleavage, if the psychological feeling of equal treatment is large enough to compensate the poor citizen's utility loss. In that case, the equal-treatment feeling will compensate the loss due to a smaller provision of the previously targeted public services provision, to the poor, as well as the increased cost of universalizing, to the well-off. This gives a political economy foundation to Ide, Furuichi and Miyazaki (2016)'s fiscal reform proposal. On the other hand, if such psychological feeling is not high enough, then, under reasonable conditions, both the poor and the well-off will be dissatisfied with such a policy. This paper's findings relate to the contemporary discussion on universal basic income and on the targeting-versus-universal-policy debate.