Chang-Gyun Park

English

Research Papers in Economics

This PDF is a selection from a published volume from the National Bureau
of Economic Research
Volume Title: The Economic Consequences of Demographic Change in 
East Asia, NBER-EASE Volume 19
Volume Author/Editor: Takatoshi Ito and Andrew Rose, editors
Volume Publisher: University of Chicago Press
Volume ISBN: 0-226-38685-6
ISBN13: 978-0-226-38685-0
Volume URL: http://www.nber.org/books/ito_08-2
Conference Date: June 19-21, 2008
Publication Date: August 2010
Chapter Title:  Comment on "The Effects of Demographic Change on 
Public Education in Japan"
Chapter Authors:  Chang-Gyun Park
Chapter URL: http://www.nber.org/chapters/c8171
Chapter pages in book: (222 - 223)222        Fumio Ohtake and Shinpei Sano
to thank the authors for providing the interesting results and also encour-
age further works on the issue. Identifying the causality and the underlying 
hypothesis will make a substantial contribution to the literature.
Comment  Chang- Gyun  Park
The chapter examines the relationship between demographic structure and 
government expenditure on compulsory public education with Japanese 
data. A standard theoretical model would predict that if the median voter 
is old enough to be without kids under compulsory public education and 
does not take the external eﬀect on general productivity level into account, 
we would observe the positive correlation between the two variables. Several 
researchers had already tackled the issue and provided evidence conform-
ing to the implication of generational competition theory. However, Japan 
seems to be an ideal test site to reexamine the issue because it has experienced 
one of the fastest demographic changes in human history.
The authors report an interesting ﬁ  nding. While the share of elderly popu-
lation had a positive relation with per capita expenditure on public education 
in the 1970s and 1980s, the relation was reversed in 1990s when demographic 
change measured by the proportion of the elderly of sixty- ﬁ  ve years or older 
was signiﬁ  cantly accelerated. They conjecture that the result may reﬂ  ect the 
institutional shift in the mid-  1980s, which helped political pressure from 
demographic structure project more clearly into collective decision making 
on public expenditure. From 1985, Japanese central government had gradu-
ally reduced the subsidies to local governments to cover part of teachers’ 
salary and local governments were forced to bear more ﬁ  scal burden with 
regard to compulsory education. One can infer that as the ﬁ  scal burden 
increased the decision making on compulsory education of local govern-
ments, it began to be aﬀected by political pressure from the elderly, who are 
thought to be less supportive for increasing expenditure on public education. 
Plausible as it sounds, the authors do not oﬀer much empirical evidence to 
support the conjecture. Further in-  depth investigation on the issue should 
be done before it is accepted as a reliable explanation on the sign reversal 
repeatedly reported in the chapter.
We should be very careful in interpreting the true implication of estimates 
of the key explanatory variable, the proportion of the elderly among the 
entire population. Though it is not entirely clear from the chapter, it seems 
that the authors include both current and capital expenditure in measur-
ing the dependent variable, per pupil expenditure on compulsory public 
Chang-  Gyun Park is an assistant professor in the College of Business Administration at 
Chung- Ang  University.The Effects of Demographic Change on Public Education in Japan    2 2 3
education. As aging progresses, some portion of capital expenditure, such 
as construction of new school buildings, may decrease even in the absence 
of generational competition in political decision making. Considering the 
lumpy nature of capital expenditure, we may observe, at least in the short 
run, a signiﬁ  cant decrease in per-  pupil expenditure on compulsory educa-
tion without lowering the quality or intensity of education and may simply 
reﬂ  ect projected decrease in demand for compulsory education. Data per-
mitting, it would be a useful exercise to conduct the empirical investigation 
for the current expenditure as well as the total expenditure.
Next, I would like to suggest a minor robust check for the key explanatory 
variable. The authors take the proportion of the elderly to approximate the 
political pressure from the older generations, who are presumed to be less 
supportive for public education. Considering considerably diﬀerent voter 
turnout ratios across generations and time, one can construct a better proxy 
for political pressure from the elderly by combining the proportion of the 
elderly and turnout ratio of the corresponding group.
Finally, the main reason we pay attention to the issue is that generational 
competition may do harm to accumulation of human capital that is widely 
believed to be the crucial factor in maintaining economic growth. We can 
easily accept the possibility that generational competition in allocation of 
public resources may result in divergence from socially optimal level of 
human capital investment to suboptimal resource allocation. Therefore, 
the ﬁ  ndings in the chapter have signiﬁ  cant policy implications as well as 
theoretical substance. However, public education is just a part of human 
capital investment and the decreased public expenditure could be compen-
sated by increased expenditure on private education by worrying parents. 
Consequently, competition among voting generations in the arena of public 
expenditure may not have major eﬀects in terms of eﬃciency of resource 
allocation. We may need to examine the expenditure on education both 
public and private to address the issue, especially in the context of Japan, 
where expenditures on private education such as extracurricular activities 
and private tutoring constitute a signiﬁ  cant part of the total human capital 
investment.

The Economic Consequences of Demographic Change in East Asia, NBER-EASE Volume 19

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