Congestion, Technical Returns, and the Minimum Efficient Scales of Local Public Expenditures: An Empirical Analysis for Japanese Cities

Masayoshi Hayashi

No CIRJE-F-852, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: On the basis of the standard model of local public production, we delineate the factors that account for the "U-shaped" per capita local public expenditures and relate them to construct an efficiency indicator for local populations. We articulate that population-induced changes in the per capita cost are related to the relative magnitude between the (i) technical elasticity of scale, which characterizes technology for the direct outputs produced by a government, and (ii) congestion elasticity, which characterizes consumption technology for the public services consumed by citizens. Those two elasticities allow us to construct an indicator that quantifies the distance of a local population from its minimum efficient scale (MES) for local public expenditures. We then estimate the urban public production structure in Japan and apply the analysis to the Japanese case. With the estimates obtained, we rank the Japanese cities according to the calculated values of the indicator.

Pages: 18 pages
Date: 2012-05
New Economics Papers: this item is included in nep-eff, nep-pbe and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2012cf852

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