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Japan’s Furusato Nouzei (Hometown Tax): Which Areas Get How Much, and Is It Really Working?

By Kay Hasegawa

In 2015, 7,260,093 individuals donated a total of ¥165,291,021,000 (approximately 1.5 billion USD total) to 1,741 municipalities in Japan using the furusato nouzei system (Ministry of Internal Affairs and Communications). In this paper, I examine this system in two ways. Firstly, I predict the amount of donations each municipality receives based on a number of explanatory variables. Secondly, I run a 2SLS difference-in-differences regression to see if the tax was successfully redistributing wealth from city centers to rural areas, using an increase in municipal-level expenditure as a proxy.

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Advisor: Charles Becker JEL Codes: H2, H21, H27

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