Abstract

In this paper, we follow the same politico-economic model presented in Nagamine(1998) which analyzes regional allocation of public investment, and extend the previous empirical analysis with respect to road investment at the prefecture level, considering some new viewpoints. Our model is the positive and empirical one which could contain several policy purposes of public investment, namely allocation policy, distribution policy and macro policy, and also consider influences from the political process. The first viewpoint is to distinguish a national road investment from a local one and to suppose the different allocation mechanism between them. The second is to consider the possible correlation between road investment and local construction companies as a political factor. The third is also to consider how national bureaucrats sent to a local government could help to pull road development projects or grants to a local area where they are sent.

The empirical results show subtle different factors deciding national road investments and local road investments. About national investments, the central bureau considers the needs for roads from each prefecture, and at the same time invests relatively more for the country area compared with the urban area. About local investments, the simultaneous framework of a road investment and a grant for it was supported. It shows that a per capita national grant reflects both a demand for road from each area and a interregional distributive consideration. About the influences from politicians, central bureaucrats and construction companies, it shows some interesting and significant results, but requires more analyses to get a confident conclusion.