The Effect of Election Outcomes on the Allocation of Government Spending in Japan

Abstract

This article investigates the causal effect of the majority party's electoral outcomes on the allocation of government spending in Japan, using prefectural data from 1981 to 1999. We first articulate the difficulty in consistently estimating the majority party's influence on the allocation of government spending due to the endogeneity of electoral outcomes. The endogeneity of electoral outcomes is more serious when the majority party makes decisions on the allocation of government spending in order to win the elections. The amount of rainfall on election days offers an exogenous variation of the electoral outcomes of the majority party across regions. Therefore, we use the amount of rainfall on election days to estimate the causal effect of the electoral outcomes on the allocation of government spending. The weather on election days affects the behavior of voters in many regions, in turn affecting the majority party's electoral outcomes. We can reject the null hypothesis that the majority party's electoral outcomes have no impact on the allocation of government spending.