Association for Public Policy Analysis & Management

This paper analyzes the place-based job creation programs conducted by the Ministry of Health, Labour and Wealth in Japan. This program is little bit unique and seeks to support to the municipal job creation policy in areas with few job opportunities. Local authorities design the job creation program and compete for money subsidized by the Ministry of Health, Labour and Welfare.

This paper has three purposes. First, this paper empirically and precisely evaluates the incidence of place-based job creation programs in Japan. The empirical evaluations of job creation have rarely been conducted in Japan. Second, this paper theoretically demonstrates that this subsidy’s optimal use is providing cities with improving of the establishment of land leasehold rights, if labor market failure exists. This paper then estimates whether these cities benefit from a larger effect of this program. Third, this paper assesses whether the program is a zero-sum game. This paper examines whether the loss of sales, workers and establishments in the cities neighboring the treated cities cancels out the gain in the treated cities.

As a result, this paper finds that the program increases workers, especially workers commuting to the cities conducting the programs, and the program induces a net population inflow. Furthermore, the programs remarkably affect the agricultural sector and the wholesale, retail trade and service sector in which most cities conduct trial business or seminars via these programs. However, the program has a lesser effect in cities with large aging populations or small working age populations.

Second, this paper demonstrates the optimal use of this program’s subsidy when market failure exists due to high hiring costs. This paper makes the model and examines it empirically. Few studies empirically investigate this issue, but the detailed data allow empirical demonstration in this paper. As a result, this paper shows that cities that improve established leasehold rights for cropland (in an effort to use aging land owners’ land by putting young workers, who have the will to work in the agricultural sector, to work) should have higher subsidies. The empirical results indicate that this program is actually more efficient in those cities.

Third, this paper confirms whether the zero-sum game does occur; in other words, the program increases employment in the treatment group but decreases the labor demand in neighboring cities due to a decrease in consumer demand. Many previous studies overlook the total aggregate effect, especially by empirical demonstration; in addition, government official only calculates the number of workers generated in the treated cities, but considering the total effect is important for policy evaluation. Many cities conduct seminars on how to attract people to local specialty products. Therefore, this paper uses the sales data from census of commerce and the population census. As a result, this paper does not observe a clear decrease in sales or the number of workers in neighboring cities of the treatment group.