An Empirical Study on Optimal Inter-regional Allocation of Local Public Goods Based on Agglomeration Economies and Diseconomies

Abstract

In Japan, the Government has allocated much more public goods to local areas than urban areas. But recently, many public projects in local areas become inefficient which seems to have a strong relation with the Japanese public investment policies that neglect the viewpoint of. In this paper, we shall theoretically derive a criterion for the optimal allocation of the local public goods based on the Flatters, Hederson and Miezhowski (1974)'s model, empirically evaluate the present allocation of local public goods and inter-regional fiscal adjustment in Japan, and then indicate some ideas concerning what allocation policy should be.