Model Analysis of Proposal System for Regional Policies

Junya Fukumoto, Maki Kunieda

Research output: Contribution to journalArticlepeer-review


This paper focuses on the “Special Zones System for Structural Reform” that was introduced in 2002. Under this system, any stakeholder (e.g. local public authorities, NGOs, private companies) can make proposals with regard to deregulations. If their proposals pass examination by the central government ministries, the relevant regulations are relaxed for certain fixed periods. This system is considered to be effective for local area development. However, despite its potential, this system is not working effectively and revisions are needed. In this paper, we describe and analyze the processes of the special zones system as a game-theoretical model based on positive political theory (e.g. Ferejohn and Shipan, 1990). The model analysis led to the following conclusions. First, the special zones system has two positive impacts on regulatory reform, i) it utilizes the incentives of local governments to make better regional policy and causes diffusion of deregulation, and ii) it makes possible social experiments on deregulation. Second, although the special zones system accelerates regulatory reform, it does not lead to socially optimal regulatory reform. Third, the special zones system empowers the incentives of stakeholders in smaller regions more than large regions. This is because smaller regions are more appropriate for doing social experiments. Fourth, a decrease in the cost of the deregulation burden by the government may not promote regulatory reform because it increases the probabilities of proposals being rejected and weakens the incentives for the local governments to make proposals. Additionally, we expanded the basic model and analyzed it to determine problems in the processes of making proposals. We consider an act of making a proposal as a collective action by various stakeholders in a region. The model analysis led to the following conclusion, it is important to coordinate the interests of various stakeholders, especially when the special zones are related to community development.

Original languageEnglish
Pages (from-to)305-321
Number of pages17
JournalStudies in Regional Science
Issue number2
Publication statusPublished - 2009


  • Analytical Politics
  • Proposal Scheme
  • Regional Policy
  • Social Capital


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