Economic Analysis Series No.198THE ECONOMIC ANALYSIS

Interdependency of Financial Indexes in the Law Relating to the Financial Soundness of Local Governments: Empirical Evidence of Japanese Prefectural Data

By Haruaki HIROTA and Hideo YUNOUE

Abstract

The purpose of this paper is to evaluate the effect of the new fiscal rule in the Japanese prefectural government. Especially, we focus on creative accounting in the Law Relating to the Financial Soundness of Local Governments (2007, Law No. 94). We estimate the effect of the new fiscal rules by using the fixed effect SUR model. Our results show that the new rule induces prefectural governments to use stock-flow adjustments. Japanese prefectural governments increase their stock indexes such as future burden ratio and real debt ratio after introducing the new fiscal rule while they decrease their fiscal deficits.

JEL Classification Codes: H77, H72
Keywords: Fiscal rule, Fiscal deficits, Law relating to the financial soundness of local governments

An Econometric Analysis of Local Government Funds in Japan
-Did Fiscal Efficiency Lead to the Accumulation of Local Government Funds?-

By Izuru MAEDA

Abstract

This paper aims to determine the factors behind the recent increase in local government funds. From a critical viewpoint, it is possible that local governments may be accumulating surplus funds as the central government issues government bonds and distributes a local allocation tax to local governments. However, the municipalities' side insists that it is the result of their administration's "efforts to improve fiscal efficiency".

Using municipal panel data, we estimated firm-level cost inefficiencies by stochastic frontier analysis. Then, regression analysis was carried out with the increase/decrease in fund balance as a dependent variable and the difference in cost inefficiencies denoting the local government's efforts to improve fiscal efficiency as one of the independent variables. In regression analysis, we used municipalities affected by the Great East Japan Earthquake and other municipalities and grouped them by several factors, including financial strength index.

The results revealed that local governments' efforts to improve fiscal efficiency were one factor in the increase of funds. However, among local governments affected by the Great East Japan Earthquake, grant from the central government may have led to the increase in funds even though efficiency in fiscal management decreased. In the high financial strength index group, it is likely that fiscal efficiency has contributed to the increase in funds. In the lower index group, the local allocation tax was a factor in increasing the funds. Therefore, fiscal transfer from the central government and fiscal efficiency are the combined factors that have increased funds.

JEL Classification Codes: H72, H77, H79
Keywords: Local government funds, Fiscal efficiency, Local allocation tax

Testing the Effect of the Husband's Participation
in Housework/Child-rearing on the Wife's Employment:
Importance of the Husband's Work Style and His Views on Gender Roles

By Kotaro TSURU and Koichi KUME

Abstract

In this paper, we empirically analyze the relationship between the husband's participation in housework/child-rearing and the wife's labor participation. To cope with endogeneity between them, we use the instrumental variables method. The result shows that the husband's housework has a significant positive effect on the wife's labor participation. Our main findings are as follow; first, more participation by the husband in housework/child-rearing encourages his wife to work. Second, daily support such as using nursery school or living with parents increases the probability of the wife's labor participation. Finally, flexibility of the husband's work style or his view on gender roles has significant effects on his participation in housework or child-rearing. The results suggest that not only providing housework or child-rearing services but also changing the husband's work style and his view on gender roles are effective to promote the married female labor participation or diversify their work styles.

JEL Classification Codes: J12, J16, J22
Keywords: Married female, Wife's labor participation, Housework, Child-rearing, Flexible workstyle, View on gender roles

Gender Differences in the Effects of 'the Subject Good at in School'
on Working Hours and Wages

By Atsushi SANNABE and Yuko TARUMI

Abstract

This study estimates the effect of favorite school subject at the age of fifteen on later working hours and earning, separately for male and female, using a micro cross-sectional data. The four main findings are: (1) females who favored physical education tend to work longer and earn more; (2) females who favored English also tend to earn more, although the effect is modest; (3) males who favored art tend to work shorter; (4) males who favored English, social studies, and math tend to earn more in this order. All findings are based on controlling for the level of university or academic discipline one graduated, degree of obesity, marriage status, age, years of employment, employment style, size of place of employment, and sector of employment.

The positive effect that physical education has on earning suggests that females who favor physical education may be stronger physically and may have less hesitation to compete in the Japanese workforce. The study also considers that effect of hidden curriculum of schooling and the meaning of each favorite subject.

JEL Classification Codes: I24, J3, J16
Keywords: Female labor supply, Education, Hidden curriculum of schooling

ESRI International Conference 2018
"Better Measurement for Better Policy Formation"and Seminar on Business Cycle Indicators

Economic and Social Research Institute