| Budget Amount *help |
¥1,700,000 (Direct Cost: ¥1,700,000)
Fiscal Year 2006: ¥500,000 (Direct Cost: ¥500,000)
Fiscal Year 2005: ¥1,200,000 (Direct Cost: ¥1,200,000)
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| Research Abstract |
The purpose of this project was to investigate and compare the Centralization vs. Decentralization problem in the three fields of private, government, and super-national sectors, based on a shared understanding that the concept of 'governance' can be applied as devices for internalizing and solving various externalities existing among players or actors.
With regard to the corporate governance problem in the private sector, we first presented a comparative theory of "Non-Integrated", "Integrated", and "Decentralized" firms. Non-integrated firms fail to consider the externalities that managers' decisions have on other firms. While integrated firms internalize these externalities, they do not consider the "private benefits" of managers. The Decentralized Firm works as a hybrid of these two structures. We also interpreted our model from the viewpoint of allocation of formal authority. Second, we considered a bilateral moral hazard framework where the principal is also a productive agent, an
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d we analyzed static and repeated game versions. We showed that the commitment problem can be solved through a reputation and self-enforcement mechanism, and presented some implications for corporate governance. Third, we constructed a dynamic context of Holdup, performed a monotonicity analysis, and interpreted the analytical results from the viewpoint of contract incompleteness crucial in the Holdup problems.
With regard to the government sector, we focused on Decentralization Reform. We analyzed the incentives for local governments to improve the public balance under resident migration, and showed that whether a local government makes its fiscal balance efficient depends on the condition of population distribution. If the residents' utility in a congested region gets worse due to the inflow of population from a sparse region, the local government in the congested region will not make efforts but rather worsen its public balance. Thus, under decentralization, local governments do not always make efforts efficiently, and the population distribution is not guaranteed to be efficient.
Lastly, with regard to the Super-National Sector, we examined the Euro-zone finance governance through the Stability and Growth Pact (SGP), where the European Commission tries to enforce SGP and Euro-zone member countries are expected to keep the SGP rule. The paper traced the process how the European Commission had unsuccessfully fought against the France's deviation from the SGP rule, through their recommendation to apply the penalty in order to ensure the value of the common currency, the Euro, and then analyzed it in a game theoretic framework. Less
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