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The Effects of Central Grants on Decentralized Social Programs: Post]2005 School Expense Assistance in Japan

  • Masayoshi Hayashi
  • Yohei Kobayashi

This study examines the effects of central matching grants for the School Expense Assistance (SEA) in the midst of increasing child poverty in Japan. The 2005 reform replaced SEA grants with increases in general revenues through the system of Local Allocation Tax (LAT). By exploiting the facts that the replaced grants were closed]ended and that LAT disbursements were not made to every locality, we could not only identify the effects of the matching grants but also decompose the effects into price and income effects. We show that the 2005 change indeed suppressed SEA expenditures. The loss of matching grants reduced per]recipient SEA benefits by about JPN\5,000 (US$56) for first]year elementary school students and JPN\12,000 (US$133) for first]year junior high school students. The loss also reduced recipient percentage among students by 1.2-2.1 percentage points from 11.52 percent in 2004, although the eligibility criteria were barely affected.

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Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd09-118.

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Date of creation: Mar 2010
Date of revision:
Handle: RePEc:hst:ghsdps:gd09-118
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  1. Michael Baker & Abigail Payne, 1998. "An empirical study of matching grants: The "cap on CAP"," Working Papers msmart-98-03, University of Toronto, Department of Economics.
  2. Poterba, James M, 1998. "Demographic Change, Intergenerational Linkages, and Public Education," American Economic Review, American Economic Association, vol. 88(2), pages 315-20, May.
  3. Rebecca M. Blank, 2000. "What Causes Public Assistance Caseloads to Grow?," JCPR Working Papers 18, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Dahlberg, Matz & Mörk, Eva & Rattsø, Jørn & Ågren, Hanna, 2008. "Using a discontinuous grant rule to identify the effect of grants on local taxes and spending," Journal of Public Economics, Elsevier, vol. 92(12), pages 2320-2335, December.
  5. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
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