Political Economy of Government Spending for Trade Liberalization: Politics of Agriculture Related Government Spending for the Uruguay Round in Japan

This paper investigates the effect of political factors on the interregional allocation of the budget to assist farmers in coping with agricultural trade liberalization in Japan. We present a simple model to show the relationship between political factors and interregional budget allocation and empirically examine whether political factors played a key role in the interregional allocation of Japanese government spending for the Uruguay Round agricultural trade liberalization. Our findings show that this allocation was distorted due to political reasons, which was problematic from the standpoints of fairness and social efficiency.