Institute of Social Science

Discussion Paper Series No. F-72
New Evidence on the Median Voter Hypothesis
in Japan

Takero DOI*

August 1998

*Research Associate, Institute of Social Science, University of Tokyo,
7-3-1 Hongo, Bunkyo-ku, Tokyo 113-0033, Japan. E-mail: tdoi@iss.u-tokyo.ac.jp

I wish to thank Toshihiro Ihori for helpful suggestions. I am also grateful for thecomments of two anonymous referees. Any remaining errors are mine.

New Evidence on the Median Voter Hypothesis in Japan
Takero DOI

Abstract
This paper provides an additional test of the median voter hypothesis inJapanese prefectures. We investigate relation between the preference of the medianvoter and the elected governor. We use data on the preference of the median voter in
Doi (1998) that comprehensively studies the hypothesis in Japanese prefectural
finance. We estimate a probit model, that is, relation between the probability ofreelection and degree of difference between actual level of expenditure and required
level of the median voter. We obtain the result that the smaller the difference
between actual level of expenditure and the (estimated) level desired by the medianvoter is, the higher the probability of reelection for the incumbent governors is. It
supports the following interpretation proposed in Doi (1998). In centralized local
system such as Japan, the result and the hypothesis mean that the median voter
affects the gubernatorial election, the elected governor petitions the central
government as a agent of the median voter, and the central government manages
local expenditures through interregional grants to reflect the preference of themedian voter in its jurisdiction.

Key words: Median Voter Hypothesis, Local Public Goods, Japanese Local Finance,
Gubernatorial Elections, Probit Model
JEL classification: H72, D72

1

I. Introduction
Doi (1998) tests the median voter hypothesis in Japanese prefectural finance.
However we cannot obtain official data on the median (voter’s) income in Japan.
Therefore the data by prefecture is constructed in the paper. Using this, Doi (1998)
estimates the demand functions of local public goods in order to test the hypothesis,
and obtains the result that the median voter hypothesis is supported by prefectural
finance. Moreover Doi (1998) shows that the median (voter’s) income is moresuitable to explain prefectural expenditure than the mean income.
Doi (1998) proposes a following interpretation from this result. In the Japanese
centralized system, each local government may formally determine its expenditures,
but the central government can control revenues of local governments.1

The

central government can manage local finance without considering the results oflocal elections, that is, the median voter’s preference for expenditures in theirprefectures. On the contrary, each prefectural governor needs to get support fromthe median voter in order to be reelected. There are many governors who arereelected in Japan. Therefore the central government reflects their preference forprefectural expenditures. Doi (1998) only refers the above interpretation but doesn’t
provide a direct test of this interpretation.
Now we try to check whether or not this interpretation is valid in this paper. We
must investigate relation between the preference of the median voter and theelected governor. So we provide its test using data on gubernatorial elections andthe preference of the median voter. We use data on the preference of the medianvoter in Doi (1998). Thus this paper has relevance to Doi (1998).
The plan of this paper is as follows. In Section II, we introduce the test results in
Doi (1998). Section III explains an estimation in order to examine relation between
the preference of the median voter and the elected governor, and reports the result.
Section IV concludes the paper.
II. Test of the Median Voter Hypothesis in Japanese Prefectures2

Doi (1998) constructs models conformed to Japanese local finance system in orderto test the median voter hypothesis. Before the test, Doi (1998) estimates data on the
median (voter’s) income using data in the 1984 National Survey of Family Income
and Expenditure, the 1989 National Survey of Family Income and Expenditure, the1992 Employment Status Survey, and the 1993 Housing Survey of Japan.
A model based on Bergstrom and Goodman (1973) deals with demand side onlyand derives a demand function of local public goods from the household utility
maximization. A model in Doi (1998) is as follows.2
ln E j = ln A′′ + γ (η + 1) ln N j + η ln{t mj (1 − m j )} + δ ln Yjm(C)where Ej is expenditure for the provision of local public goods, Nj is population injurisdiction j, Yjm is after-tax income of the median voter in jurisdiction j, t mj is tax
share of the median voter in jurisdiction j, and mj is the ratio of the matching grants(National Government Disbursements) that it gets total expenditures. Also η is its
elasticity of tax price (supposing constant), δ is its elasticity of income (supposing
constant), γ is its congestion parameter (γ = 0 when it is purely public, and γ = 1
when it is purely private), and A" is a constant.
Table 1 shows the results of estimating model (C). Except for dependent andindependent variables in models, Doi (1998) uses the following data as socioeconomic characteristics; the percentage of population aged 0 to 14 (PC14), thepercentage of population aged 65 and over (PC65), the rate of increase in population(INCPOP), the rate of increase in gross prefectural domestic expenditure (atconstant prices) (GROWTH), the share of gross prefectural domestic expenditure of
the primary industry (IND1), the share of gross prefectural domestic expenditure of
the secondary industry (IND2), the rate of change in land price at residential sites(LAND), the ratio of high school graduates who advanced to schools of higher grades(ADVANCE), the area (AREA), the active job openings ratio (JOB), and thefinancial capability index (in prefectural finance).

1 See Shibata (1993) for further details.
2 See Doi (1998) for further details.

3

The result in Table 1 leads to the conclusion that the median voter hypothesis is
supported in Japanese prefectural expenditure. Because parameters concerning themedian voter are significant and valid economically in model (C). Furthermore thisresult is robust for it obtains estimation in 1984, 1989, 1992, and 1993, derived fromvarious statistics.
Furthermore Doi (1998) directly tests whether median income is better than
mean income in order to explain local expenditures with J test introduced byDavidson and MacKinnon (1981), and concludes that median income is more
powerful than mean income as an explanation of local spending. Hence these resultsmean that the median voter hypothesis is supported in Japanese prefectures.
III. Preference of Median Voter and Probability of Reelection
We find that the median voter affects the level of prefectural expenditure in
Japan. Why the median voter hypothesis is held in Japanese prefectures? In acentralized local system such as Japan, the central government can control local
expenditures with ignoring voter’s preference. If the central government does so,however, the governor will be able to lose the next election. Therefore he appeals to
the central government to reflect voter’s requests. Under a centralized local system,
the median voter hypothesis is held if the central government urged by the governor
controls local expenditures to be preferred by voters.
These are descriptively supported by Reed (1986). Reed (1986) concludes thatJapanese local governments have less authority than in federal states but moreauthority than in other unitary states from case studies. Moreover Reed (1986)
indicates that Japanese central bureaucrats find it extremely difficult to deal withcitizens' movements that take up local problems, and governors and mayors tend to
emerge in conflicts between the central government and citizens' movements (p.61).
We, however, have never confirmed relation between the median voter (or his
preference) and the governor (or gubernatorial election). If the governor requests tothe central government with reflecting preference of the median voter, theprobability of reelection for the incumbent governors raises as the difference4between actual level of expenditure and the level required by the median voter
becomes closer. We must test the relation econometrically.
Probit model is suitable for this test. We consider the following probit model:
Pr( REELE j = 1) = Φ (const .+ λ 1 RES j + ∑ λ i other variables)i

1 if the incumbent is reelected
where REELE j = {,0 if the incumbent is not reelected
RESj = |(actual value of log(Ej)) - (fitted value of log(Ej))| in model (C).
λi: the coefficient of explanatory variable i
We take RESj as absolute value of the difference between actual and fitted values oflog(Ej) in model (C) of Section II. Because fitted value of log(Ej) means theoreticallevel reflected the preference of the median voter, and absolute value of thedifference between them means degree of difference between expenditure level
preferred by the median voter and actual level.
We must obtain adequate data on gubernatorial elections and the governor not
reelected in them after the year when those surveys are examined. We show thedata on gubernatorial elections and the governor reelected or not in Table 2. In theelection that the incumbent doesn't stand as a candidate, if the candidate who is
supported by the same parties that support the incumbent wins the election, such
an election is classified into the election that the incumbent is reelected (R). It isdifficult to obtain enough data on the governor not reelected, but it is data onelections in 1994 and 1995 after examining the 1993 Housing Survey of Japan thatare suitable for our test. Samples of the governor not reelected are sufficient in theyears.3 Thus we make REELEj based on 1994 and 1995 elections and RESj based on
the estimation of Model (C) in 1993 reported in Table 1.
We estimate the probit model using those data. The result is reported in Table 3.
We try to estimate including socio-economic characteristics and the number of

3 The 1993 Housing Survey of Japan was examined in October 1993. Almost all gubernatorial

election in 1993 had been held until October. We exclude elections in 1993 from observations in
the test.

5

candidate in the election (CAND) as other variables. Especially, we use the rate ofincrease in gross prefectural domestic expenditure (at constant prices) (GROWTH)
and active job openings ratio (JOB), associated with studies on political businesscycle, as other variables.4 But their coefficients are not significant. Then we omit
those variables. As shown in column (I) of Table 3, the coefficient of RESj issignificantly negative. It means that the smaller the difference between actual levelof expenditure and the (estimated) level desired by the median voter is, the higher
the probability of reelection for the incumbent governors is. Thus we confirm theabove-mentioned relation econometrically.
IV. Conclusion
We analyze relation between the preference of the median voter and the
gubernatorial election. We use data on the preference of the median voter in Doi(1998). We estimate a probit model, that is, relation between the probability ofreelection and degree of difference between actual level of expenditure and required
level of expenditure of the median voter. We obtain the result that the probability ofreelection for the incumbent governors increases as the difference between actuallevel of expenditure and the (estimated) level desired by the median voter decreases.
It means that the median voter affects the gubernatorial election.
We consider connection between the result and the median voter hypothesis. In
centralized local system such as Japan, both mean that the median voter affects the
gubernatorial election, the elected governor petitions the central government as aagent of the median voter, and the central government manages local expenditures
through interregional grants to reflect the preference of the median voter in its
jurisdiction. It supports the interpretation proposed in Reed (1986) and Doi (1998).
In other words, the median voter hypothesis is held in Japanese prefectures because
there are many reelected governors several times.

4 JOB is a proxy of the unemployment rate because we cannot obtain it by prefecture in each6

Data Sources
Ej : Total Expenditures
Hj : Local Allocation Tax + Local Transfer Taxes
mj : National Government Disbursements / Total Expenditures
Ministry of Home Affairs, “Annual Statistical Report on Local Government
Finance”
Nj : Population
Ministry of Home Affairs, “Basic Resident Registers ”
tmj : prefectural taxes paid by median household / Prefectural Taxes:
Ministry of Finance, “Ministry of Finance Statistics Monthly,” andMinistry of Home Affairs, “Annual Statistical Report on Local Government
Finance”
The percentage of population aged 0 to 14, and The percentage of population aged
65 and over:Statistics Bureau, Management and Coordination Agency, “Monthly Report on
Current Population Estimates ”
The rate of increase in gross prefectural domestic expenditure (at constant prices),
The share of gross prefectural domestic expenditure of the primary industry, andThe share of gross prefectural domestic expenditure of the secondary industry:
Economic Planning Agency, “Annual Report on Prefectural Accounts”
The rate of change in land price at residential site:
National Land Agency, “Prefectural Land Price Survey”
The active job openings ratio:
Ministry of Labor, “Annual Report on Labor Market”
The ratio of high school graduates who advanced to schools of higher grade:
Ministry of Education, “School Basic Survey”
The area (in 1990):
Statistics Bureau, Management and Coordination Agency, “Population
Census”

year.

7The financial capability index (in prefectural finance):
Ministry of Home Affairs, “Financial Index Table by Prefecture”

References
Bergstrom, T.C. and R.P. Goodman, 1973, Private demands for public goods, American
Economic Review 63, 280-296.
Davidson, R. and J.G. MacKinnon, 1981, Several tests for model specification in the presence ofalternative hypotheses, Econometrica 49, 781-793.
Doi, T., 1998, Empirics of the median voter hypothesis in Japan, Institute of Social Science
Discussion Paper Series No. F-69, University of Tokyo.
Reed, S.R., 1986, Japanese Prefecture and Policymaking, University of Pittsburgh Press.
Shibata, T. ed., 1993, Japan’s Public Sector: How the Government Is Financed, University ofTokyo Press.

8

Table 1

Estimation of Models using OLS
Dependent Variable : lnE

Year
Model

1984
(C)

1989
(C)

1992
(C)

1993
(C)

Intercept

1.577(0.985)0.770(0.501)

1.968(1.870)-0.173(-0.085)0.260(2.325)-0.500(-4.784)
1.200(4.432)0.248(2.032)-0.489(-4.374)
1.110(3.514)0.258(3.016)-0.453(-5.677)
0.936(4.614)0.382(3.044)-0.407(-3.395)
1.096(3.294)4.406(7.842)

4.781(6.897)6.367(8.240)4.657(6.822)-0.013(-5.813)-0.0092(-4.129)-0.0057(-2.390)-0.0057(-2.072)

0.041(3.870)-0.0067(-2.925)

0.037(4.324)0.033(6.871)

0.056(5.082)-0.0037(-2.485)-0.013(-2.475)-0.132(-4.748)

47
0.969

47
0.977

lnw
lnN
ln{t m (1‑m )}
lnY m
ln
lnY
AREA
IND1
IND2
PC14
PC65
ADVANCELAND
INCPOPGROWTH

NOB
R2

47
0.972

47
0.967

The above parentheses indicate the t-values using White's consistent covariance.
ηδγ
α-0.500(0.000)1.200(0.000)0.520(0.000)-0.489(0.000)1.110(0.001)
0.486(0.001)-0.453(0.000)0.936(0.000)0.472(0.000)-0.407(0.001)1.096(0.002)0.644(0.000)βThese parentheses indicate the p-values of the hypothesis: the parameter is equal to zero.
Source: Doi(1998)

Table 2
Gubernatorial Election
Prefecture 1989 1990 1991 1992 1993 1994 1995
Hokkaido
R
R
Aomori
R
N
Iwate
R
N
Miyagi
N
R,N
Akita
R
R
Yamagata
R
N
Fukushima
R
IbarakiR
N
TochigiR
Gumma
R
R
Saitama
N
Chiba
R
R
Tokyo
R
N
Kanagawa
R
R
Niigata
R
R
ToyamaR
Ishikawa
R
R
Fukui
R
R
Yamanashi
N
R
NaganoR
Gifu
R
R
Shizuoka
R
R
Aichi
R
R
Mie
R
N
Shiga
R
R
Kyoto
R
R
Osaka
R
N
Hyogo
R
R
Nara
R
R
Wakayama
R
R
TottoriR
R
Shimane
Okayama
Hiroshima
Yamaguchi
Tokushima
KagawaEhime
Kochi
Fukuoka
Saga
Nagasaki
Kumamoto
Oita
MiyazakiKagoshima
Okinawa
Number of election
Number of reelection

R
R

R

R

R

R

R

R
R

N
R
R

R

R

R

8
8

23
21

R
R
R
R

R

R
R
R

R

R
8
7

R

9
8

10
7

R
R
R

R
7
7

23
18

R: The Gubernatorial Election was held and the incumbant was reelected in the year.
N: The Gubernatorial Election was held and the incumbant was not reelected in the year.
Blank: The Gubernatorial Election was not held in the year.
Data Source: National Association of Prefectural Election Management Commission,"Senkyo (Election)," Various issues.

Table 3
Probit Estimates, 1993
Dependent Variable: Pr(REELE j =1)
Intercept
RES
CAND

(I)
1.904
(3.574)-14.439(-2.383)

GROWTH(II)
4.677(2.659)-12.195(-1.570)-0.787(-1.969)

JOB
Log likelihood-10.144-7.289(III)
2.045(3.094)-16.498(-2.259)
0.432(1.546)-8.561(IV)
1.618(1.397)-13.749(-2.116)0.361(0.272)-10.106(V)
5.816(2.220)-14.488(-1.582)-1.035(-1.702)0.513(1.414)(VI)
5.175(1.941)-12.798(-1.567)-0.823(-1.892)-5.980

The above parentheses indicate the t-values.
5% Critical Values: t(25)=2.060, t(26)=2.056, t(27)=2.052, t(28)=2.048
SampleNOB
Mean of RES
Mean of CAND
Mean of GROWTH
Mean of JOB

All REELE=1 REELE=0
30
25
5
0.050
0.039
0.112
3.300
2.960
5.000
0.499
0.695
-0.483
0.721
0.747
0.592

(VII)
1.829
(1.398)-15.966(-2.055)-0.491(-0.265)

0.431(1.542)0.264(0.187)(VIII)
9.202(1.410)-16.762(-1.615)-1.490(-1.385)0.656(1.383)-2.007(-0.659)-7.253-8.543-5.734