Reference Behavior in Japanese Local Public Education

Abstract

This paper explores the influence of a local government's expenditure decisions on other local governments' expenditure decisions with regard to Japanese public education. In the previous decade, the Japanese public education system was gradually decentralized. Among other aspects, the regulation concerning the actual fixed number of pupils per class was relaxed in 2001, and then again in 2003. This relaxation of regulations by the Ministry of Education, Culture, Sports, Science and Technology resulted in an increase in the educational expenditure of local governments. After the national deregulation corresponding to the decline in the number of children, local governments tended to adopt other local governments' decisions.

This paper attempts to empirically analyze this behavior in terms of decisions regarding Japanese public education and provides a general conclusion on this behavior of local governments. Local governments' expenditures on public education are positively affected by the expenditures of other local governments. Local governments attempt to increase their expenditures on public education if other local governments do so.

In addition, this paper also reveals that local governments may decrease public education expenditure considering the progressive aging of Japanese society. However, while Ohtake and Sano (2010) showed that the elasticity with respect to aging is between –0.6 and –0.580, our result shows that it is between –0.218 and –0.120. This difference in the figures suggests the shift toward the relaxation of regulations pertaining to the Japanese public education system.