Inefficiency and Self-Determination: Simulation-Based Evidence from Meiji Japan

98 Pages Posted: 11 Sep 2015 Last revised: 21 Dec 2015

See all articles by Eric Weese

Eric Weese

Yale University Department of Economics

Masayoshi Hayashi

University of Tokyo

Masashi Nishikawa

Aoyama Gakuin University

Date Written: December 1, 2015

Abstract

Does the exercise of the right of self-determination lead to inefficiency? This paper considers a set of centrally planned municipal mergers during the Meiji period, with data from Gifu prefecture. The observed merger pattern can be explained as a social optimum based on a very simple individual utility function. If individual villages had been allowed to choose their merger partners, counterfactual simulations show that the core is always non-empty, but core partitions contain about 80% more (post-merger) municipalities than the social optimum. Simulations are possible because core partitions can be calculated using repeated application of a mixed integer program.

Keywords: Municipal mergers, one-sided matching, moment inequalities, mixed integer programming, Gifu

JEL Classification: C63, C71, H77, K33, N95

Suggested Citation

Weese, Eric and Hayashi, Masayoshi and Nishikawa, Masashi, Inefficiency and Self-Determination: Simulation-Based Evidence from Meiji Japan (December 1, 2015). Available at SSRN: https://ssrn.com/abstract=2651855 or http://dx.doi.org/10.2139/ssrn.2651855

Eric Weese (Contact Author)

Yale University Department of Economics ( email )

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Masayoshi Hayashi

University of Tokyo ( email )

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Tokyo, Tokyo 113-8657
Japan
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81358415521 (Fax)

Masashi Nishikawa

Aoyama Gakuin University ( email )

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Shibuya-ku, Tokyo 150-8366
Japan
+81-425-62-8768 (Phone)
+81-425-62-8768 (Fax)

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