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Getting the Most Out of Public Sector Decentralisation in Japan

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  • Isabelle Joumard
  • Tadashi Yokoyama

Abstract

Revamping fiscal relations across levels of government is of paramount importance in supporting fiscal consolidation and public sector effectiveness. This paper analyses a number of problems, including regulations that limit local governments’ ability to innovate and respond to local citizens’ preferences, the inefficient system of intergovernmental grants, the complex structure of local taxes and fiscal rules which are too lenient to secure fiscal discipline. The paper concludes that the grant system should be reformed to promote local governments’ incentives to introduce innovations so as to better respond to needs at lower cost. Barriers to the effective use of sub-national governments’ taxing powers should be removed while efforts should be made to keep the tax system as simple and neutral as possible. Existing fiscal rules and market instruments should be hardened. This would require that the central government state clearly that it will not intervene as a lender of last ... Optimiser l'impact de la décentralisation au Japon La réforme des relations financières entre l’État et les collectivités territoriales est essentielle pour soutenir le processus d’assainissement budgétaire et l’efficacité du secteur public. Ce document met en lumière un certain nombre de problèmes, notamment les réglementations qui limitent la capacité des collectivités territoriales à innover et à répondre aux préférences des citoyens, un système inefficace de transferts intergouvernementaux, une fiscalité locale excessivement complexe et des règles budgétaires trop laxistes. Ce document conclut qu’une réforme du système des transferts est nécessaire pour inciter les collectivités territoriales à innover afin de répondre mieux et à moindre coût aux besoins des citoyens. Les dispositions institutionnelles qui limitent l’utilisation effective des pouvoirs des collectivités territoriales en matière d’impôts doivent être éliminées tout en s’assurant que le système fiscal soit le plus simple et le plus neutre possible. Les règles ...

Suggested Citation

  • Isabelle Joumard & Tadashi Yokoyama, 2005. "Getting the Most Out of Public Sector Decentralisation in Japan," OECD Economics Department Working Papers 416, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:416-en
    DOI: 10.1787/123441886722
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    References listed on IDEAS

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    1. Andrea Bassanini & Stefano Scarpetta & Philip Hemmings, 2001. "Economic Growth: The Role of Policies and Institutions: Panel Data. Evidence from OECD Countries," OECD Economics Department Working Papers 283, OECD Publishing.
    2. Takero Doi & Takeo Hoshi, 2003. "Paying for the FILP," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 37-70, National Bureau of Economic Research, Inc.
    3. James M. Poterba & Kim Rueben, 1999. "State Fiscal Institutions and the U.S. Municipal Bond Market," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 181-208, National Bureau of Economic Research, Inc.
    4. Naoyuki Yoshino & Eisuke Sakakibara, 2002. "The Current State of the Japanese Economy and Remedies," Asian Economic Papers, MIT Press, vol. 1(2), pages 110-126.
    5. Giuseppe Nicoletti & Stephen S. Golub & Dana Hajkova & Daniel Mirza & Kwang-Yeol Yoo, 2003. "Policies and International Integration: Influences on Trade and Foreign Direct Investment," OECD Economics Department Working Papers 359, OECD Publishing.
    6. Yoshino, Naoyuki & Robaschik, Frank, 2004. "Local government finance in Japan : Can irresponsible borrowing be avoided?," Duisburg Working Papers on East Asian Economic Studies 72, University Duisburg-Essen, Asia-Pacific Economic Research Institute (FIP).
    7. Doi, Takero & Ihori, Toshihiro, 2002. "Fiscal Reconstruction and Local Interest Groups in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 492-511, December.
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    Cited by:

    1. Luca Gandullia, 2012. "The role of direct taxes in fiscal decentralization," DEP - series of economic working papers 6/2012, University of Genoa, Research Doctorate in Public Economics.
    2. Ms. Izabela Karpowicz, 2012. "Narrowing Vertical Fiscal Imbalances in Four European Countries," IMF Working Papers 2012/091, International Monetary Fund.
    3. Ichiro Aoki, 2008. "Decentralization and Intergovernmental Finance in Japan," Finance Working Papers 23074, East Asian Bureau of Economic Research.
    4. Brieuc Monfort, 2015. "Can Increased Public Expenditure Efficiency Contribute to the Consolidation of Public Finances in Japan?," Working Papers halshs-01548620, HAL.
    5. Richard M. Bird, 2013. "Below the Salt: Decentralizing Value-Added Taxes," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1302, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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    More about this item

    Keywords

    collectivités territoriales; discipline budgétaire; fiscal discipline; fiscal federalism; fédéralisme financier; intergovernmental grants; Japan; Japon; local government; transferts intergouvernementaux;
    All these keywords.

    JEL classification:

    • H1 - Public Economics - - Structure and Scope of Government
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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