Does local council size affect land development expenditure? Quasi-experimental evidence from Japanese municipal data

The purpose of this paper is to evaluate a fiscal common-pool problem in a Japanese local government. Especially, we focus on the relationship between council size and land development expenditure of local government using a dataset of 13,989 municipalities in Japan from FY2001 to FY2006. We deal with an identification of causal effects by applying regression discontinuity design’s framework to address problem of endogeneity bias. Our results show that land development expenditure of small municipalities induce the fiscal common-pool problem over public projects.