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Municipality amalgamation and free-ride behavior: Eligibility assessments for long-term care insurance in Japan

  • Katsuyoshi Nakazawa

    ()

    (University of Toyo)

Amalgamation offers municipalities an incentive to free ride when they can subrogate the load to a new municipality after amalgamation. Previous literature has clarified opportunistic behavior in local public bond issues. However, if the municipality does not have a leeway in policy decision making, it cannot adopt free-ride behavior. Although the Japanese long-term care insurance system has been so designed that the municipality does not have discretion in its working, doubts have been raised on this score. This study empirically considers this issue by examining municipality behavior before amalgamation. Difference-in-difference regression confirms a free-ride effect in the eligibility assessments for long-term care by the Japanese municipality. These results mean that the Japanese long-term care insurance system is not managed in accordance with the institutional design.

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File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/40-2013_nakazawa.pdf
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Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 201340.

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Length: 18 pages
Date of creation: 2013
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:201340
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  1. Gilligan, Thomas W. & Matsusaka, John G., 2001. "Fiscal Policy, Legislature Size, and Political Parties: Evidence from State and Local Governments in the First Half of the 20th Century," National Tax Journal, National Tax Association, vol. 54(n. 1), pages 57-82, March.
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  3. Olivia S. Mitchell & John Piggott & Satoshi Shimizutani, 2004. "Aged-Care Support in Japan: Perspectives and Challenges," NBER Working Papers 10882, National Bureau of Economic Research, Inc.
  4. Katsuyoshi Nakazawa, 2013. "Amalgamation, free-ride behavior, and regulation," MAGKS Papers on Economics 201339, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Jordahl, Henrik & Liang, Che-Yuan, 2006. "Merged Municipalities, Higher Debt: On Free-riding and the Common Pool Problem in Politics," Ratio Working Papers 107, The Ratio Institute.
  6. Bradbury, John Charles & Stephenson, E Frank, 2003. " Local Government Structure and Public Expenditures," Public Choice, Springer, vol. 115(1-2), pages 185-98, April.
  7. Bradbury, John Charles & Crain, W. Mark, 2001. "Legislative organization and government spending: cross-country evidence," Journal of Public Economics, Elsevier, vol. 82(3), pages 309-325, December.
  8. Gilligan, Thomas W & Matsusaka, John G, 1995. "Deviations from Constituent Interests: The Role of Legislative Structure and Political Parties in the States," Economic Inquiry, Western Economic Association International, vol. 33(3), pages 383-401, July.
  9. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
  10. Weingast, Barry R & Shepsle, Kenneth A & Johnsen, Christopher, 1981. "The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 642-64, August.
  11. Gordon Tullock, 1959. "Problems of Majority Voting," Journal of Political Economy, University of Chicago Press, vol. 67, pages 571.
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