Local Public Finance in Japan: Fiscal Imbalances and the Economics of Decentralisation

This article examines Japan's local public finance system, highlighting how local governments manage government spending despite generating lower revenue through local taxes. To bridge this fiscal imbalance, the system utilizes intergovernmental transfers and local bonds to ensure regional equity and administrative stability. While decentralisation allows for policies tailored to local resident preferences, it also risks fiscal externalities, such as "races to the bottom" in tax rates or inefficient spending caused by the "flypaper effect".

Reference: 財政学をつかむ 第3版
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