Discussion Papers 2021

CIRJE-F-1172	"Do Public Account Financial Statements Matter? Evidence from Japanese Municipalities"
Author Name	Bessho, Shun-ichiro and Haruaki Hirota
Date	July 2021
Full Paper	PDF file
Remarks

Abstract
Many governments are introducing business-like accounting systems. This paper examines the fiscal effects of compiling business-like financial statements on the expenditures of local governments, exploiting a quasi-experimental environment in Japan. Using the variation in deadlines for compiling new statements given by the central government, we found that business-like financial statements might trigger the local government to reconstruct their expenditures. While the reconstruction differs among localities, the social assistance expenses that are not nationally standardized and subsidized decreased in common.
Keywords: fiscal rule, financial statement, expenditure, difference-in-differences with instrumental variables

Abstract

Many governments are introducing business-like accounting systems. This paper examines the fiscal effects of compiling business-like financial statements on the expenditures of local governments, exploiting a quasi-experimental environment in Japan. Using the variation in deadlines for compiling new statements given by the central government, we found that business-like financial statements might trigger the local government to reconstruct their expenditures. While the reconstruction differs among localities, the social assistance expenses that are not nationally standardized and subsidized decreased in common.

Keywords: fiscal rule, financial statement, expenditure, difference-in-differences with instrumental variables