Distribution of Funds for Road Investment and Regional Economic Growth: A Case of Japanese Prefectures

다국어 초록 (Multilingual Abstract)

This paper clarifies whether or not the distribution of funds for road investment from the central government to local governments is affected by political incentives and whether or not the funds contribute to regional economic growth. I employ a simultaneous-equation approach in order to attain this aim, and estimate the regional distribution functions and the regional growth regression using a panel of Japanese prefectural level data for a period of 1980 to 2010. Empirical results show that, (1) conditional convergence is observed between Japanese prefectures during our sample period, (2) regional distribution of funds for road investment is affected by political factors such as governing party (LDP)’s incentive to buy votes and pressure by a local interest group, (3) the funds for road investment conducted by local governments contribute regional economic growth, but road investment funded or conducted by the central government does not. This finding indicates the possibility that road investment conducted by local governments, which is less likely to affected by distributive politics, contribute regional economy more than road investment funded or conducted by the central government does and that decentralization is desirable in order to improve efficiency of road investment.

목차 (Table of Contents)

• 1. Introduction
• 2. Related Literature
• 3. Institutional setting of Japan
• 4. Empirical Analysis
• 5. Conclusion