THEORETICAL AND EMPIRICAL ANALYSIS OF THE EXPENDITURE PATTERN OF THE LOCAL GOVERNMENT

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(1)City banks, Long-term credit banks, and Credit associations show similar branch allocations in 47 prefectures in Japan from 1975 to 1987. Post office allocations and the branch office allocations of regional banks and trust banks are similar in 1987. The deposit absorption of each branch was 110.95 at all banks and 35.81 at the post office in 1980. However the figure increased at the post office and it became 72.02 in 1987. All banks also show some increase and the figure became 145.99 in 1987.(2)The share of the Japan Development Bank (JDB) was 35.6 % in 1963 and that of the Housing Loan Corporation (HLC) was 16.9 % in 1963. However, the share of JDB became only 14.1 % in 1989 and HLC's share became 55.2 % in 1989. Regional allocation of loans made through government financial institutions among 47 prefectures in Japan becomes very similar to those of private banks in these days. One of the role of the government banks is to distribute loans to various prefectures in Japan. Recent pattern is against those objectives.(3)Faced with the de-regulation of deposit rate of interest, the private banks are seeking profits more than before. The government intention of allocating funds to various prefectures might be jeopardized because of the changing behavior of provate banks. The government loans has to be either inducing private loans into that prefecture or focusing on welfare oriented.(4)The reallocation of the government investment will increase the rate of interest of that prefecture. On the other hand, the government loans reduce the rate of interest. The public investment has to lead the private investment into that prefecture rather than crowding out private activities.