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Does Local Spending Have Repercussion from Tax Structure?--Evidence from Japan--

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  • Nobuki Mochida

    (Faculty of Economics, The University of Tokyo)

Abstract

   The original intention of this article is to explore what are the driving forces for the local tax structures. Is tax policy determining the local expenditure portfolio, or is the relationship the other way around? We expect some research venturing to explore the interplay between the local expenditure responsibilities and tax policy. This article examines these fresh issues in the light of Japan's recent experiences, and tries to bring not only analytical framework but also qualify information on local tax structures. The motivation is that we can test causality through regression models using the notion of Granger causality. So far it is often said that expenditure has not been decided by making tax revenue given, instead expenditure may be decided for a certain reason and for financing it corresponding revenue is 'guaranteed' in Japan. As local public sector has evolved from 'agency' model to 'autonomy' model, this stereotypical way of thinking will come into question. This article shows that it is possible to have some repercussions from the tax structure to expenditures.

Suggested Citation

  • Nobuki Mochida, 2014. " Does Local Spending Have Repercussion from Tax Structure?--Evidence from Japan--," CIRJE F-Series CIRJE-F-922, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2014cf922
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    File URL: http://www.cirje.e.u-tokyo.ac.jp/research/dp/2014/2014cf922.pdf
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    References listed on IDEAS

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    1. Zvi Hercowitz & Michel Strawczynski, 2004. "Cyclical Ratcheting in Government Spending: Evidence from the OECD," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 353-361, February.
    2. Messere, Ken & de Kam, Flip & Heady, Christopher, 2003. "Tax Policy: Theory and Practice in OECD Countries," OUP Catalogue, Oxford University Press, number 9780199241484, November.
    3. Ishi, Hiromitsu, 2000. "Making Fiscal Policy in Japan: Economic Effects and Institutional Settings," OUP Catalogue, Oxford University Press, number 9780199240715, November.
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