Abstract
On the basis of the standard model of local public production, we delineate the factors that account for the “shaped”er capita local public expenditures and relate them to construct an efficiency indicator for local populations. We articulate that population-induced changes in the per capita cost are related to the relative magnitude between the (i) technical elasticity of scale, which characterizes technology for the direct outputs produced by a government, and (ii) congestion elasticity, which characterizes consumption technology for the public services consumed by citizens. Those two elasticities allow us to construct an indicator that quantifies the distance of a local population from its minimum efficient scale (MES) for local public expenditures. We then estimate the urban public production structure in Japan and apply the analysis to the Japanese case. With the estimates obtained, we rank the Japanese cities according to the calculated values of the indicator.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
This is a updated version of Hayashi (2002a, b), which has been cited by a number of Korean studies and documents issued by international organizations, but have been unavailable as a discussion paper in English version (Hayashi 2002a). While the text in this version has been edited, the analysis and the estimation results have been kept intact as those estimated in the original discussion paper.
- 2.
Duncombe and Yinger (1993) use an elasticity expression that is analogous to Eq. (12.10). Their expression is \([\partial (c/n)/\partial n]\cdot n/(c/n)=\eta _{c}^{g}\cdot \eta _{n}^{g} -1\), where the elasticity for technical returns to scale is defined differently as \(\eta _{c}^{g} \equiv (\partial c/\partial g)\cdot (g/c)\), a reciprocal of our measure.
- 3.
While Edwards (1990) considers the question of increasing congestion and that of camaraderie effects by setting up separate specifications, our single specification allows for both possibilities.
- 4.
For example, while police and refuse collection are responsibilities for cities, towns, and villages, they are taken care of by the Tokyo metropolitan government in the special wards (note that refuse collection has now become a responsibility of the special districts, starting in 2000).
- 5.
See Davidson and MacKinnon (1993, pp. 399–402) for a textbook explication.
- 6.
Note that we assume the output variable \(z_{i}\) is independent of total cost \(c_{i}\) and therefore of error term \(u_{i}\), which is a common assumption in the literature. The basis for this assumption is a public choice process where some public decision makers (e.g., voters) decide the desired level of output, which is exogenous to public officials who minimize costs subject to their technical constraint.
References
Bergstrom, T.C., and R.P. Goodman. 1973. Private demands for public goods. American Economic Review 63: 280–296.
Blom-Hansen, J., K. Houlberg, S. Serritzlew, and D. Treisman. 2016. Jurisdiction size and local government policy expenditure: Assessing the effect of municipal amalgamation. American Political Science Review 110 (4): 812–831.
Borcherding, T.E., and R.T. Deacon. 1972. The demand for the services of non-federal government. American Economic Review 62: 891–901.
Bradford, D.F., R.A. Malt, and W.E. Oates. 1969. The rising cost of local public services: Some evidence and reflections. National Tax Journal 22: 185–202.
Brueckner, J.K. 1981. Congested public goods: The case of fire protection. Journal of Public Economics 15: 45–58.
Davidson, R., and J.G. MacKinnon. 1993. Estimation and inference in econometrics. New York: Oxford University Press.
Duncombe, W., and J. Yinger. 1993. An analysis of returns to scale in public production, with an application to fire protection. Journal of Public Economics 52: 49–72.
Edwards, J.H.Y. 1990. Congestion function specification and the “publicness” of local public goods. Journal of Urban Economics 27: 80–96.
Hayashi, M. 2002a. Congestion, technical returns, and the minimum efficient scales of local public expenditures: The case of Japanese municipalities. Discussion paper series 01-01, institute for research in business and economics, Meiji Gakuin university.
Hayashi, M. 2002b. Chiho jichitai no saisho koritsu kibo (The minimum efficient scales of municipalities). Financial Review 61: 59–89. [in Japanese].
Hayes, K. 1986. Local public good demand and demographic effects. Applied Economics 18: 1039–1045.
Hayes, K.J., and D.J. Slottje. 1987. Measure of publicness based on demographic scaling. Review of Economics and Statistics 69: 713–718.
Hirsch, W.Z. 1959. Expenditure implications of metropolitan growth and consolidation. Review of Economics and Statistics 41: 232–241.
Hirsch, W.Z. 1965. Cost functions of an urban government service: Refuse collection. Review of Economics and Statistics 47: 87–93.
Kitchen, H. 1976. A statistical estimation of an operating cost function for municipal refuse collection. Public Finance Quarterly 4: 56–76.
Ministry of Internal Affairs and Communication, 1997. Shichoson Kessan Jokyo Shirabe 1995 (Local Public Expenditures of Municipalities 1997).
Nihon Keizai Shinbunsya, 1998. 610 shi no gyosei sahbisu suijun ichi-ran (Table of public service levels of 610 cities). Nikkei Chi-iki Joho, 0(303).
Reiter, M., and A.J. Weichenrieder. 1999. Public goods, club goods, and the measurement of crowding. Journal of Urban Economics 46: 69–79.
Statistics Bureau, Management and Coordination Agency, 1997. Kokusei Chosa 1995 (National Census 1995).
Stevens, B.J. 1978. Scale, market structure, and the cost of refuse collection. Review of Economics and Statistics 60: 438–448.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Hayashi, M. (2019). Congestion, Technical Returns, and the Minimum Efficient Scales of Local Public Expenditures: An Empirical Analysis for Japanese Cities. In: Hosoe, M., Ju, BG., Yakita, A., Hong, K. (eds) Contemporary Issues in Applied Economics. Springer, Singapore. https://doi.org/10.1007/978-981-13-7036-6_12
Download citation
DOI: https://doi.org/10.1007/978-981-13-7036-6_12
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-13-7035-9
Online ISBN: 978-981-13-7036-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)