Public Works Policy and Outcomes in Japan and the United States

Abstract

This article analyzes the pattern of public works spending in Japan and the United States from the perspective of recent thinking on the role of infrastructure in promoting economic growth. This is an important topic given the sluggish economic growth in Japan in the 1990s. There is renewed interest in the role of public infrastructure in shaping the economy’s fortunes in light of developments in the United States. The prolonged economic downturn, rising public works spending and public debt, and the election of the Koizumi government have motivated the reassessment of decades-old public works policies in Japan. The article begins by reviewing recent developments and findings in the literature regarding public works spending. This is followed by an analysis of patterns of public works spending in Japan and the outcomes of this policy. The later sections explore policies to reposition public works spending in favor of more productive sectors to best contribute to economic growth.