On the Factor of Bankruptcy of Japanese Third Sector(in Japanese)

Nobuo Akai

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: This paper analyzes the factor of the deterioration of the financial position of the third sector in Japan and derives the structural problem equipped in the third sector. Recently a new movement like PFI or PPP toward an efficient provision of public services is focused on in a stream of the structural reform of the traditional public investment system, especially in Japan. In order to empirically clarify the effect of this structural reform, we need to collect the data in partnership projects. However in many countries like Japan, PFI was just introduced so there does not exist enough data to check whether the incentive problem occurs or not. Fortunately, there exists another sector that has already tried to utilize private vitality in Japan. This is called "the third sector" in Japan, which is introduced in 1960's. According to the data of Ministry of Home affairs, there exist 6834 third sectors in 2001. Interestingly, 35% of them have faced a deficit problem and moved to the bankruptcy. It is valuable to check the factor of this situation in order to evaluate the recent movement toward the efficient provision of public services. In this paper, we first broadly discuss the reason why the third sector deteriorates its financial position and faces the deficit problem. It contains both external factors, which are independent of the structure of the third sector, and internal factors, which are related to the structure of the third sector. The structural problem in the third sector is often called the incentive problem, which is created by the partnership of two agents with different purposes. The empirical result from the regression shows that the financial position of the third sector depends on the degree of the partnership, which means that there exists the incentive problem associated with the structure of the third sector. Given this result, we finally propose that it is necessary to remove the incentive problem hidden in the partnership structure in order to make PFI or PPP successful. The clarification of the responsibility is one of the useful methods to achieve it.

Pages: 45 pages
Date: 2003-05
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