Urban economics meets 'dosyusei': Measuring prefectural fiscal externality using spatial econometrics

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The research named 'Dosyu-system plan in Japan and prefectural fiscal externality' discussed the first of three points in introducing Dosyu-system plan in Japan: how combine current prefectures?; which tax instrument should be attributed to new 'Dosyu's?; where captal cities of each 'Dosyu' locate? We propose that measured fiscal externality among prefectures are used to evaluate the combinations. Empirical analysis on a spatial econometric model and recent prefectural level statistics was conducted. Our result showed that the 11-Dosyu plan should be introduced to minimize current fiscal externality.The reserach named 'Multiple testing problem in spatial autocorrelation test' showed that the distance decay parameter plays a significant role in the multiple-testing problem of spatial model.