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Municipal Mergers and Capitalization: Evaluating the Heisei Territorial Reform in Japan

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  • Masayoshi Hayashi

    (Faculty of Economics, The University of Tokyo)

  • Takafumi Suzuki

    (Graduate School of Economics, The University of Tokyo)

Abstract

Based on the theory of land price capitalization, we evaluate the effects of municipal mergers by exploiting extensive municipal mergers in the Heisei territorial reform and dataset of land prices compiled by the Japanese government. We allow the effects of municipal mergers to vary over time—both ex-ante (as anticipation effects) and ex-post (as realized effects). Through a series of estimation, we find a robust pattern of the effect of municipal mergers. The ex-ante or anticipation effect gradually grows to culminate in the year just before the actual amalgamation. Once the merger is realized, the ex-post effect, starting with a smaller effect than the maximal anticipation effect in the previous year, gradually declines toward zero. This result then implies that the Heisei territorial reform yielded only temporal benefits that dissipated in the long run.

Suggested Citation

  • Masayoshi Hayashi & Takafumi Suzuki, 2018. "Municipal Mergers and Capitalization: Evaluating the Heisei Territorial Reform in Japan," CIRJE F-Series CIRJE-F-1105, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2018cf1105
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