Nobuo Akai

Fiscal Decentralization and Economic Volatility: Evidence from State-Level Cross-Section Data of the USA

This paper examines the implications of fiscal decentralization for economic stability. It has been discussed that fiscal decentralization reduces the variance of GDP growth, due to the greater diversification of performance across jurisdictions. We examine this theoretical result using a panel data set of the 50 states of the USA over the period of 1992–1997. We show that the theoretical specification of the production function is supported. We also show a negative significant relationship between fiscal decentralization and economic volatility. The results are robust when we take into account the endogeneity of fiscal decentralization.

Ricardian equivalence for local government bonds: Budget constraint approach

Abstract It is shown that if consumers own land, the free rider problem does not occur because a change in local government financing is completely reflected in the price of land. This means that the Ricardian equivalence theorem holds not only for national government bonds but also for local government bonds.

Strategic Interaction Among Local Governments in Japan: An Application to Cultural Expenditure†

In the context of limited local government resources, cultural expenditures are often targeted for reduction. In Japan in particular, with its aging population, cultural expenditures have low priority. This paper examines whether or not local governments strategically influence each other with respect to cultural spending, using data from Japanese local governments. By estimating the reaction functions for local cultural expenditures, we find that there exists free‐rider behaviour between local cultural expenditures that produce beneficial spillover effects. We also find a larger free‐rider incentive the shorter the distance between neighbouring regions, the shorter the travel time between neighbouring regions, and the larger the neighbouring regions population. Furthermore, our results reveal that the provision of cultural services through intergovernmental strategic behaviours is more elastic with respect to the relative change of the distance or the travel time among neighbouring regions than to that of the population size among neighbouring regions.

Incentive Transfer Schemes with Marketable and Nonmarketable Public Services

We examine an incentive transfer scheme in an executive agency system when there are both marketable and nonmarketable public services. We show that because of the incentive transfer scheme, which contributes to the elimination of a governments budget deficit, social welfare is higher in the executive agency system than in a traditional system when the shadow cost of public funds is large. In addition, the scheme is desirable from a welfare viewpoint when the marketable and nonmarketable public services are complements, or when the production technology exhibits a high degree of cost complementarity.