Abstract
The basic aim in this paper is to clarify intergovernmental fiscal relations in Japan. Particular attention is paid to the impact of various types of central government grants on the local government budgets. This is an important issue in a nation like Japan, where the fiscal system is strongly centralized. First, a model is constructed to express the local fiscal behavior under the present grant policies, following the past attempts developed in the United States of America. Then, the estimates of this model are attempted using available data, and some policy questions are examined. The main empirical conclusions that are drawn from the Japanese experience are much more plausible than those in the US case. This implies that the control of central government via various grant policies is more dominant in Japan.
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