How the 30% Cap Reshapes Competition for Donations in Japan’s Furusato Nozei Program

Yusuke Makino and Hikaru Ogawa
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Yusuke Makino: Graduate School of Economics, The University of Tokyo

No CIRJE-F-1258, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: Under Japan’s Furusato Nozei program, a 30% cap on return gifts was introduced to curb inter-municipal competition for donations. This paper analyzes the effects of the cap in a setting where municipalities compete not only through the value of return gifts subject to the regulation but also by employing other strategies to attract donors. The results show that while the cap suppresses gift-based competition, it may intensify competition through other channels, making overall outcomes ambiguous. The negative effects of introducing the 30% cap are more likely when donors value giving less, donations are less sensitive to gift return rates, or alternative strategies are highly effective.

Pages: 14 pages
Date: 2025-09
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2025cf1258

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