Policy Choices and Party System of Local Assemblies in Japanese Prefectures:

The Impact of Assembly Fragmentation on Fiscal Expenditure under Intersectoral Conflict

Abstract

Previous studies on policy choices by prefectures have mostly focused on relationship between a governor and a local assembly, each elected separately. In contrast, nature of local assemblies, where multiple political groups gather to make a collective decision, has not attracted adequate attention so far. An assembly is an entity for collective decision making. The degree of segmentation within an assembly affects whether multiple political groups can agree to take a unified action, especially when the assembly and governor disagree over a specific policy.

  This paper introduces an outcome of a panel data analysis on budget formation process in prefectures over 1990s. The research is based on prior researches that indicate difference of policy preferences by a governor and by an assembly often become apparent, under severe fiscal constraints, in a form of confrontation of governors who emphasize fiscal discipline vs assembly members aiming at expanding expenditures.

  The analysis shows that an inverse U-shaped relationship was found between the effective number of political groups in an assembly and the amount of local government bonds issued. It suggests that the most difficult situation for the governor to achieve fiscal discipline is when the effective number of political groups is around 4.