Population growth and local public finance in Japanese cities

Abstract

The determinants of Japanese city population growth for the period 2000 to 2005 are empirically examined with particular attention to local public finance. The selection of one Fiscal Indicator (FI) from four alternatives – ordinary balance ratio (OBR), ratio of outstanding borrowing (ROB) to the ordinary account, debt service payment ratio (DSPR) and financial power index (FPI) – and the consideration of spatial auto‐correlation provide 12 regression models. In each regression, six additional explanatory variables are considered with reference to earlier empirical studies. Empirical results suggest that (1) three FIs, excluding DSPR, are significant; and (2) the number of local government officers and the ratio of graduates of not‐less‐than junior college are highly significant in all specifications.

Keywords:

• city population growth
• local public finance
• spatial auto‐correlation

JEL Classification::

• R23
• R51
• O53

Acknowledgements

I thank Hikaru Ogawa and the participants at the annual meeting of the Applied Regional Science Conference 2008 for their useful comments. In addition, the very helpful comments from an anonymous referee are gratefully acknowledged. This article is substantially an extended version of bachelor dissertations presented by my seminar members. I thank them for useful discussions. Needless to say, any remaining errors are mine.

Notes

¹ Liner and McGregor (2002) provided empirical results consistent with the existence of an optimal level of annexation in the US.

² I considered another amenity variable for population growth but did not find suitable variables owning to the limitation of data sets.