Do Central-Government Grants Affect Welfare Caseloads? Evidence from Public Assistance in Japan

This study examines the existence of a loosening effect of central funding on a local social policy by exploiting a specific mechanism in the Japanese system of central grants and two institutional changes in categorical grants for local social assistance programs. Despite performing various types of estimations, we fail to substantiate the existence of the loosening effect. This result indicates the dominance of central control over local discretion in public assistance programs, and suggests that important factors are administrative rather than fiscal.