Local government expenditure and council size: Quasi-experimental evidence from Japan
In order to evaluate a fiscal common-pool problem, this paper focuses on the relationship between local government council size and its expenditure. Generally, local councilors internalize the benefit of public projects targeted at their political jurisdictions, but underestimate and prefer to externalize the cost of public projects due to the national subsidy system. When council sizes become larger, their expenditure might be larger because of the selfish behavior of local council members. This paper estimates the positive effect of local council size on local government expenditure using a dataset of 13,989 municipalities in Japan over a period of 6 years. In Japan, local council size is a deterministic and discontinuous function of municipal population size under legal rules. We pay attention to this exogenous discontinuity and apply a regression discontinuity design to consider an endogeneity bias. The results show that the larger the size of the local council the larger the size of expenditure they undertake. In particular, we find that growing small municipalities tend to increase their expenditures, so that for example, 1% increases in local council size lead to about 1.2% increases of expenditures by small municipalities. Our results show that the fiscal common-pool problem is produced in small municipalities.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Persson, Torsten & Tabellini, Guido, 1999.
"The Size and Scope of Government: Comparative Politics With Rational Politicians,"
CEPR Discussion Papers
2051, C.E.P.R. Discussion Papers.
- Persson, Torsten & Tabellini, Guido, 1999. "The size and scope of government:: Comparative politics with rational politicians," European Economic Review, Elsevier, vol. 43(4-6), pages 699-735, April.
- Persson, Torsten & Tabellini, Guido, 1998. "The size and scope of government: Comparative politics with rational politicians," Seminar Papers 658, Stockholm University, Institute for International Economic Studies.
- Torsten Persson & Guido Tabellini, 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," NBER Working Papers 6848, National Bureau of Economic Research, Inc.
- Persson, T. & Tabellini, G., 1998. "The Size and Scope of Government: Comparative Politics with Rational Politicians," Papers 658, Stockholm - International Economic Studies.
- Peter Egger & Marko Koethenbuerger, 2010.
"Government Spending and Legislative Organization: Quasi-experimental Evidence from Germany,"
American Economic Journal: Applied Economics,
American Economic Association, vol. 2(4), pages 200-212, October.
- Peter Egger & Marko Koethenbuerger, 2010. "Government Spending and Legislative Organization: Quasi-experimental evidence from Germany," EPRU Working Paper Series 2010-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- David S. Lee & Thomas Lemieux, 2010.
"Regression Discontinuity Designs in Economics,"
Journal of Economic Literature,
American Economic Association, vol. 48(2), pages 281-355, June.
- 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.
- Per Pettersson-Lidbom, 2004.
"Does the Size of the Legislature Affect the Size of Government? Evidence from Two Natural Experiments,"
350, Government Institute for Economic Research Finland (VATT).
- Pettersson-Lidbom, Per, 2012. "Does the size of the legislature affect the size of government? Evidence from two natural experiments," Journal of Public Economics, Elsevier, vol. 96(3), pages 269-278.
- 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.
- Guido Imbens & Thomas Lemieux, 2007.
"Regression Discontinuity Designs: A Guide to Practice,"
NBER Working Papers
13039, National Bureau of Economic Research, Inc.
- Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
- Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Technical Working Papers 0337, National Bureau of Economic Research, Inc.
- Bradbury, John Charles & Stephenson, E Frank, 2003. "Local Government Structure and Public Expenditures," Public Choice, Springer, vol. 115(1-2), pages 185-98, April.
- Reza Baqir, 2002. "Districting and Government Overspending," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1318-1354, December.
- Lee, Myoung-jae, 2005. "Micro-Econometrics for Policy, Program and Treatment Effects," OUP Catalogue, Oxford University Press, number 9780199267699, June.
- Schaltegger, Christoph A. & Feld, Lars P., 2009. "Do large cabinets favor large governments? Evidence on the fiscal commons problem for Swiss Cantons," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 35-47, February.
- 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.
- Yianos Kontopoulos & Roberto Perotti, 1999. "Government Fragmentation and Fiscal Policy Outcomes: Evidence from OECD Countries," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 81-102 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:42799. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.