Urban Sprawl and Local Public Service Costs in Japan

Abstract

In this chapter, we measure the extent to which the suppression of urban sprawl reduces the marginal cost of providing local public services in Japan by estimating the local expenditure function. We expand on existing estimates in Japan by establishing a theoretical framework to economically interpret the estimated parameters. Specifically, we first derive the estimated local expenditure function by combining the supply and demand functions for local public services. Second, we implement the estimation using cross-sectional data from 2008 for 1085 Japanese municipalities. Overall, urban sprawl growth has a positive and significant impact on local expenditure, with the parameters for the relationship estimated to be between 0.011 and 0.055. This statistically significant and theoretically consistent outcome suggests that, in Japan, a one percent decrease in urban sprawl can reduce the marginal cost of providing local public services by 0.053–0.113%. These results contribute to the quantitative evaluation of compact cities.