Public Policy and Economic Growth in the Integrating Japanese Economy

Hiroki Kondo ()
Additional contact information
Hiroki Kondo: Sophia University

Chapter Chapter 5 in The Political Economy of Fiscal Consolidation in Japan, 2015, pp 113-141 from Springer

Abstract: Abstract In an economy where goods and factors markets are progressively integrating and modern industries with scale economies and externalities are prevailing, economic activities tend to concentrate in a limited number of regions. This paper considers the outcomes of fiscal competition, competition in tax and subsidies and competition in public infrastructure provision among regions in this process. There is no pure strategy Nash equilibrium. A region’s choice of capital subsidy or public infrastructure provision is not deterministic. We therefore consider a mixed strategy Nash equilibrium. Fiscal competition tends to be fiercer in this equilibrium. Concentration of economic activities causes serious and persistent income gaps among regions. As a consequence, regions are impelled make more aggressive efforts to attract modern industries within their borders. Yet the industries the regions seek to introduce will settle in only a limited number of regions. Many regions fail in introducing an industry after making tremendous investments in public infrastructure. As a consequence, huge amounts of public infrastructure remain are left unused in many regions, incurring huge welfare losses.

Keywords: Fiscal competition; Industrial agglomeration; New economic geography (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:advchp:978-4-431-55127-0_5

Ordering information: This item can be ordered from
http://www.springer.com/9784431551270

DOI: 10.1007/978-4-431-55127-0_5

Access Statistics for this chapter

More chapters in Advances in Japanese Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().