POVERTY TRAPS WITH LOCAL ALLOCATION TAX GRANTS IN JAPAN

Takero Doi

The Japanese Economic Review, 2010, vol. 61, issue 4, 466-487

Abstract: This essay investigates poverty traps related to Local Allocation Tax (LAT) grants in Japan. LAT grants, which are transfers of funds from the central government to local governments, make efforts for enhancing regional economic growth, due to the calculation of the LAT grants. Using a simple dynamic model, we show that LAT grants lower regional income and are a disincentive to localities to increase their estimated tax revenue. Using panel Granger (non-)causality tests, we find empirical support for asserting that there are poverty traps due to the LAT grants in Japan.

Keywords: H77; O43; R11 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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