Local Governmental Consolidation and Corresponding Water Supply Services in Japan: An Empirical Analysis of Efficiency and Greenhouse Gas Emission Changes

Abstract

The Japanese government has been aggressively conducting local governmental consolidations since 1999. The objective is said to be fiscal efficiency of the local government. The effects generated by the consolidations, however, are not sufficiently confirmed. This paper, therefore, focuses on water supply services and then examines whether the consolidations have improved efficiency of the corresponding water supply services. Using Japanese local governmental data from 2004 to 2011, our econometric analysis found that the consolidations significantly resulted in technological efficiency gain by 1% in the water supply services. Additionally, based on the assumption of a linear relationship between efficiency and the rate of carbon dioxide （CO₂） emissions, we calculated emission reduction based on consolidations. As a result, a reduction of up to approximately 0.2 million tons of CO₂ emissions was achieved in the 8 years from 2004 to 2011. Therefore, it is concluded that consolidation generated the improvement of technological efficiency as well as emission reductions.