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This paper examines how class closures affect the academic achievements of Japanese students in primary and middle schools, with a special focus on the heterogeneous effects of the socioeconomic backgrounds of students' households. Utilizing the administrative data of students from a city in the Tokyo Metropolitan Area, we estimated the effects of class closures due to flu epidemics, on the students' language and math test scores. We find that class closures adversely affect math test scores of economically disadvantaged students. The magnitudes of the negative effects on disadvantaged students are heterogeneous by subject, grade in school, gender, timing of class closures, and students' achievements at the beginning of the school year. Male students from economically disadvantaged households are more susceptible to class closures, and those with relatively low achievements before class closures suffer more seriously from them. The deleterious effects among economically disadvantaged male students are driven not only by reductions in class hours in school, but also by increases in time spent watching TV and playing video games. We also find that school resources can mitigate the negative impact of class closure among economically disadvantaged students. These results indicate the importance of public programs in preventing a negative temporal shock to student learning environments.

We evaluate the causal effect of class size (i.e., number of students in a classroom) on incidence of class closure due to flu epidemic in 2015, 2016, and 2017, applying an instrumental variable method with the Maimonides rule to administrative data of public primary and middle school students in one of the largest municipalities within the City of Tokyo Metropolitan Area. Given the classroom area of 63m2 set by regulation in Japan, class size reduction improves social distancing among students in a classroom. We find that class size reduction is effective to reduce class closure due to flu: one unit reduction of class size decreases class closure by about 5%; and forming small classes with 27 students at most, satisfying the social distancing of 1.5 m recommended to prevent droplet infection including influenza and COVID-19, reduces class closure by about 90%. In addition, we find that the older are students, the larger are the effects of class size reduction. Our findings provide supportive evidence for the effectiveness of social distancing policy in primary and middle schools to protect students from droplet infectious disease including COVID-19.

This study estimates teacher value-added (TVA) for language arts and mathematics test scores of students in public primary schools to investigate the empirical relationship between testscore TVA and observable traits and promotions of teachers. Our empirical strategy employs Chetty, Friedman, and Rockoff (2014a) with school-year fixed effects as an additional control for potential sorting of students across schools. Using unique administrative panel data of students in public primary schools of a large municipality of Japan, we find TVA distribution to have variance comparable to ones observed in the U.S. schools. Using TVA estimates, we examine their associations with gender, teaching experience, age, and promotions of teachers. We find that these observable characteristics of teachers are statistically significantly associated with TVA estimates. Additionally, we find that TVA estimates are positively associated with teacher promotions.

This paper aims to provide an overview of the basics of Japan's local public administration and finance system and to analyze how Japan's municipalities restore their fiscal balance after a fiscal shock. In Japan, local governments play a major role in redistribution. Combined with regional disparities in tax capacities and an inflexible local tax system, there is a large vertical fiscal gap in Japan between the central and local governments - a gap that necessitates the transfer of funds from central to local governments. Under this system, the fiscal adjustments in Japan's municipalities occur mainly via changes in government investment, and they account for 63%-95% of adjustments in permanent unit innovations in grants and own-source revenue. In contrast to the role of expenditure, the municipalities' own-source revenue plays a limited role in balancing the local budget. The results of this study also reveal that 40% of the increase in own-source revenue is offset by a reduction in grants. Furthermore, municipalities can induce grants by expanding government current expenditure. Finally, this study offers and discusses some policy implications.

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This paper studies how Japanese municipalities restore their fiscal balance after a budget shock. The results show that fiscal adjustments to a shock are mainly made by subsequent changes in government investment and government consumption: about 80-89% (21-24%) of a permanent unit innovation in grants and own revenue is adjusted by changes in government investment (consumption). The contribution of government expenditure in balancing local budgets is much larger in Japan than in other countries. In contrast to the role played by the expenditure side, the municipalities’ own-source revenue plays a limited role in the adjustment process of local budget balancing. In addition, it is observed that government investment is highly volatile in Japan than in other countries. However, the magnitude of volatility in municipalities’ own revenue and grants is small, implying that the municipalities face restrictions in adjusting their fiscal balance by own-source revenue and the higher-level government provides grants rigidly. This paper additionally analyzes a sample based on population size and time period.

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March 23, 2011, We investigate the effects of marginal changes of marginal tax rates of Japanese income tax system, computing the social marginal costs of public funds (SMCF) generated by marginal increase in tax rates. We use large micro data sets on Japanese households, and estimate a structural discrete choice model of household labor supply. Our estimation results show that the average of total elasticity of males ranges between 0.0276 and 0.0521, and that of female between 0.0429 and 0.2134. Based on the estimated utility functions, we find that SMCF for raising the marginal tax rate applied for those with low- or medium-income level is smaller than those with more income. Our results could suggest Japanese income tax system should be less progressive., グローバルCOEプログラム = Global COE Program

The tax simulation studies in Japan have necessarily relied on arbitrary sets of preference parameters due to the paucity of the empirical estimates. Motivated by this state of the art, we estimate the labor supply function and preference parameters for Japanese prime-age males, allowing for the complex Japanese income tax system and taking advantage of a large microdata set we obtained for this study. We employ two versions of the method of maximum likelihood. One is the celebrated Hausman method which assumes a linear labor supply function (Hausman 1979). The other is the method proposed by Zabalza (1983), which takes advantage of an explicit specification of the CES preferences. We have examined several estimation patterns and calculated elasticities over the whole or sub-samples of observations. While the sample averages of uncompensated elasticities are estimated between 0.06 -- 0.21, those of compensated counterparts result in higher ranges (0.08 -- 1.39) due to rather large negative estimates for the income effects. It may be interesting to point out that the compensated elasticities tend to be higher in the CES case (0.41 -- 1.39) than the Hausman case (0.08 -- 1.12) despite the fact that the former is immune from the MaCurdy critique (MaCurdy et al. 1990).

This paper, taking an explicit account of the progressive tax system, calculates the social marginal cost of public funds (SMCF) for the Japanese economy using large set of micro data of Employment Status Survey. Before calculation of SMCF, we estimate labor supply function of prime-age male using the structural estimation method introduced by Burtless and Hausman (1978). The estimated compensated elasticity of labor supply with respect to wage rate is 0.104 and income effect is -0.08 on average, while the uncompensated elasticity is 0.018. Based on these values the following SMCF's are calculated. First, we compute the SMCF for the three types of progressivity preserving tax increases by Musgrave and Thin (1948) for each prefecture. Our estimates indicates (a) the SMCF of each prefecture normalized by that of Tokyo is greater than unity, which means that the social cost of raising additional tax revenue in Tokyo is less than in any other prefectures; (b) the SMCF of Tottori, Saga, Okinawa or Aomori is relatively high. Second, we also calculate the SMCF for a single bracket tax rate change and compare the estimates among the brackets. The results show that the welfare is most increased with tax rate reductions in 7-8 million yen under the Benthamite social welfare function. These results suggest (a) if it is possible to impose labor income taxes by regional-differentiated tax rate, levying tax on residents in Tokyo is socially most desirable. If not, it is beneficial to raise the local labor income tax rate of Tokyo and transfer the additional tax revenue to other prefectures. (b) the society with more inequality aversion than Nash requires an increase in marginal tax rate of middle-income, rather than an increase in tax rate that low-income people face.

This paper analyzes effects of accumulation of public capital on welfare in the transition to an aging Japan by applying a simulated general equilibrium growth model. We develop an 80 period OLG model, where the latest data of Japan has been used in order to make our results as realistic as possible in the simulation analyses. We explicitly incorporate public capital, which consists of two different kinds: one directly affecting utility such as public parks, and the other stimulating private production such as public roads. We consider the former type of public capital by introducing it as a component in utility, and the latter type by adding it to the private production function. Our simulation results indicate: Firstly, as the level of outstanding government bonds decreases, GDP, thus welfare decreases in the short run. However, in the long run, GDP and welfare increase by the decrease in outstanding government bonds. Secondly, as long as public capital has a certain positive effect on utility, the accumulation of public capital financed by tax is preferable to future generations provided that the level of public debts is kept constant. Finally, an increase in public capital which stimulates private production results in an increase in GDP, but the effect of the increase in this kind of public capital on social welfare entirely depends on the evaluation of the other type of public capital.

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