Political Economy Of Public Capital Formation In Japan

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Executive Summary

This paper investigates public investment policy (mainly from the 1980s onwards) with a political-economic approach. The points of this paper are as follows. First, at the macro level, it is possible that the short-term fluctuation of public investment has been controlled by the government party's political incentive to win an election rather than in order to dampen economic fluctuations. Second, as for regional allocation, up to 1993 when the Liberal Democratic Party of Japan (LDP) stepped down from government, the LDP had had a great influence on public investment allocation; however, following such a government alternation the influence of local special interest groups may have become stronger.

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