The main purpose of this paper was to investigate the government's preference to cause agricultural expenditure growth after World War II in Japan. Assuming that the determination process of public expenditures is modeled through the utility maximization behavior of bureaucrats, I estimate the parameters of the government's expenditure function to agricultural expenditures by three cointegrated regressions and Jahansen's ML approach, which are asymptotically equivalent.
This paper provides some unique insights into the level of Japanese agricultural public expenditures in post-World War II periods. To begin with, there is considerable evidence of a long-run equilibrium in agricultural expenditures, and associated with this, short-run dynamics which are involved in returning to the equilibrium path. A unique long-run (cointegration) relationship can be found between government agricultural expenditures, total government expenditures and the agricultural population rate of the country. In the long run, agricultural expenditures increased stably with the growth of total expenditures. From my estimates of the parameters, a 1% increase in total expenditures would lead to a 0.95-0.97% expansion of agricultural expenditures, whereas a 1% decrease in the agricultural population rate would result in a 0.4-0.6% reduction. Next, with respect to the short-run view, I found that rapid shrinkage of the agricultural population positively affected the growth of agricultural expenditures and that the adjustment process to the long-run equilibrium level of agricultural expenditures was relatively slow. It is suggested that agricultural expenditures during the 60s and 70s in Japan were expanded temporally due to the rapid constriction of the agricultural population in the process of economic growth. However, in recent years, the agricultural expenditure level has neared the long-run equilibrium.
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