Empirical evidence of fiscal common pool problem and municipal mergers

2017 Fiscal Year Final Research Report

• Project/Area Number: 26780181
• Research Category: Grant-in-Aid for Young Scientists (B)
• Allocation Type: Multi-year Fund
• Research Field: Public finance/Public economy
• Research Institution: Musashi University
• Principal Investigator: Hirota Haruaki 武蔵大学, 経済学部, 教授 (10553141)
• Project Period (FY): 2014-04-01 – 2018-03-31
• Keywords: 市町村合併 / コモン・プール問題 / 意思決定プロセスの断片化 / 議会規模

Outline of Final Research Achievements

The purpose of our research is to evaluate a fiscal common pool problem in Japanese municipal mergers. We identify causal effects by applying propensity score matching within a differences-in-differences framework to address the problems of endogeneity bias and sample selection bias. Our results show that the subordinate merger partner suffers from adverse fiscal conditions and creates a fiscal common pool problem in public projects just before mergers.

Also, we focus on the relationship between council size and land development expenditure of local government using a dataset of municipalities in Japan from FY2004. We deal with an identification of causal effects by applying regression discontinuity design's framework to address problem of endogeneity bias. Our results show that land development expenditure of large municipalities induce the fiscal common-pool problem through public projects.

Free Research Field

財政・公共経済