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Vol. 55, No. 4, pp. 313-327 (2004)

“A Non-Keynesian Effect of Fiscal Policy -Evidence from Data on Japanese Prefectures-”
Arata Ito (Graduate Student of Economics, Hitotsubashi University), Tsutomu Watanabe (The Institute of Economic Research, Hitotsubashi University)

We examine a non-Keynesian effect of fiscal policy using Japanese prefectural consumption data. Based on this non-Keynesian effect hypothesis, an important characteristic can be pointed out. When the national financial position is good, the consumption by prefecture does not dependent on the ratio of the national tax burden on the prefecture to the national average burden per capita. However, when the economy becomes unhealthy, the people of prefectures where national tax burden is relatively high consume less than those where the burden is low. We find that the people who pay higher national taxes tend to cut consumption significantly in times of financial aggravation. Moreover, this result does not change even if we account for other factors, such as land price and employment risk, which are considered to affect consumption. This evidence leads us to the conclusion that such a non-Keynesian effect is one of the causes of consumption depression in Japan in the latter 1990s.