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Getting the Most Out of Public Sector Decentralisation in Japan

  • Isabelle Joumard
  • Tadashi Yokoyama

Revamping fiscal relations across levels of government is of paramount importance in supporting fiscal consolidation and public sector effectiveness. This paper analyses a number of problems, including regulations that limit local governments’ ability to innovate and respond to local citizens’ preferences, the inefficient system of intergovernmental grants, the complex structure of local taxes and fiscal rules which are too lenient to secure fiscal discipline. The paper concludes that the grant system should be reformed to promote local governments’ incentives to introduce innovations so as to better respond to needs at lower cost. Barriers to the effective use of sub-national governments’ taxing powers should be removed while efforts should be made to keep the tax system as simple and neutral as possible. Existing fiscal rules and market instruments should be hardened. This would require that the central government state clearly that it will not intervene as a lender of last ... Optimiser l'impact de la décentralisation au Japon La réforme des relations financières entre l’État et les collectivités territoriales est essentielle pour soutenir le processus d’assainissement budgétaire et l’efficacité du secteur public. Ce document met en lumière un certain nombre de problèmes, notamment les réglementations qui limitent la capacité des collectivités territoriales à innover et à répondre aux préférences des citoyens, un système inefficace de transferts intergouvernementaux, une fiscalité locale excessivement complexe et des règles budgétaires trop laxistes. Ce document conclut qu’une réforme du système des transferts est nécessaire pour inciter les collectivités territoriales à innover afin de répondre mieux et à moindre coût aux besoins des citoyens. Les dispositions institutionnelles qui limitent l’utilisation effective des pouvoirs des collectivités territoriales en matière d’impôts doivent être éliminées tout en s’assurant que le système fiscal soit le plus simple et le plus neutre possible. Les règles ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 416.

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Date of creation: 27 Jan 2005
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Handle: RePEc:oec:ecoaaa:416-en
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  1. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 181-208 National Bureau of Economic Research, Inc.
  2. Doi, Takero & Ihori, Toshihiro, 2002. "Fiscal Reconstruction and Local Interest Groups in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 492-511, December.
  3. Andrea Bassanini & Stefano Scarpetta & Philip Hemmings, 2001. "Economic Growth: The Role of Policies and Institutions: Panel Data. Evidence from OECD Countries," OECD Economics Department Working Papers 283, OECD Publishing.
  4. Giuseppe Nicoletti & Steve Golub & Dana Hajkova & Daniel Mirza & Kwang-Yeol Yoo, 2003. "Policies and International Integration: Influences on Trade and Foreign Direct Investment," OECD Economics Department Working Papers 359, OECD Publishing.
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