Japanese Subsidy-distribution Policy and the Ruling of LDP

Abstract

Since its formation in 1955, the Liberal Democratic Party (LDP) has maintained one-party dominance for more than three decades. Unless any split of party or the reform of Japanese electoral system occurs, it is generally believed that the LDP will remain as the ruling party. Undoubtedly, LDP's dominance is one of the most significant topics in contemporary Japanese political study. This research is intended to enlarge the dimension of our study by speculation upon the relationship between the LDP's subsidy-distribution policy and election strategy.
The one and only purpose of subsidy-distribution policy is the re-election of the government party. However, when we study subsidy-distribution policy, we must be aware of two theoretical problems. One is the analytical asymmetry of ruling party's policy intention and voters' voting behavior. Simply put, the former is supposed to be clear and rational while the latter is by nature individualistic and diverse.
Accordingly, we can generalize policy intention into an analytical pattern and hence predict a government party's strategy for re-election. On the other hand, it is not easy to examine the effectiveness of a ruling party's distribution policy from voters' behavior. It is influenced by various factors so that a comprehensive generalization of voting pattern would be extremely complex. Since we cannot single out the influence of distribution policy against many others, the evaluation of its effectiveness may be erroneous and fruitless.
The second problem relates to our assumptions towards a ruling party's behavior. As we assume a government party has the intention to utilize distribution policy for the sake of re-election, it is not realistic for us to postulate that the party will use money without any strategic consideration behind. On the contrary, since the resources (i. e. financial budget) that the ruling party can procure are limited, an economically rational party has to distribute its budget into a strategic and optimal way so as to maximize the utility, or the possibility to be re-elected. We can consider this as an economic rationale in studying government party behavior. Based on this rationale, we can not only examine simply a public policy but work out also ruling party's re-election strategy run by subsidy-distribution politics.
In this research, we establish an SVD approach to explain ruling party's behavior. Through which we are trying to formulate a theoretical model to illustrate how the LDP allocates its financial budget to local prefectures in a strategic and optimal way. The SVD model states the association between two empirical variables: S, standing for subsidies and VD, vote difference. The method of study is twofold. First, we deduce a ruling party's behavioral pattern under the foregoing principle of economic rationality. And second, we test this deduced empirical model from the LDP's actual performance of distribution policy in the past several decades.
We consider government subsidies to local prefectures as a media or means of resource-distribution policy. Because of its highly politicized and discretionary nature, we classify ‘common construction expense’ in government expenditure as a suitable object of analysis. Our results show that the post-war Japanese subsidy-distribution can be divided into three periods: 1) formative period, 2) growth period and 3) reformative period. Furthermore, we find that the ruling party is likely to allocate more resources to those prefectures with higher strategic values.