Intergovernmental competition for donations: The case of the Furusato Nozei program in Japan

This paper shows that municipalities compete excessively for donations under a unique program called Furusato Nozei (Tax payment to hometown) in Japan. Under the program, people make donations to their favorite municipalities and municipalities that have received donations give reciprocal gifts in r...

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Bibliographic Details
Published inJournal of Asian economics Vol. 67; p. 101178
Main Authors Fukasawa, Eiji, Fukasawa, Takeshi, Ogawa, Hikaru
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.04.2020
Subjects
Donation
Efficiency
Interregional fiscal competition
H77
R28
Interregional fiscal competition
Efficiency
Donation
R51
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Summary:This paper shows that municipalities compete excessively for donations under a unique program called Furusato Nozei (Tax payment to hometown) in Japan. Under the program, people make donations to their favorite municipalities and municipalities that have received donations give reciprocal gifts in return. This causes governments to compete for donations by setting “return rates” — the value of a gift as a percentage of the donation received. Our estimates show that, in the most likely case, this competition reduces net revenue by at least 7.5% compared to when the municipalities do not compete for donations.
ISSN:1049-0078
1873-7927
DOI:10.1016/j.asieco.2020.101178