Distributive impact and evaluation of devolution proposals in japanese local public finance

Abstract

The purpose of this paper is to examine the redistributive effects of interregional transfer of local taxes and grants from central to local government. We also examine the redistributive consequences of decentralization in the local public finance system. Especially, we focus on the impacts of the devolution of revenue instruments on the local governments. To analyze the redistributive effects, we employ the Reynolds-Smolensky index based on the Lorenz function and its decomposition. Our results show that the devolution of revenue instruments to local governments may increase the income differences among the regions