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Do Mentoring and Oversight Matter? The Effects of Allocating Central Administrators to Local Government Units: Evidence from Japan

During the 2000s, Japanese central administrators were actively transferred from the central government to mentor and monitor local governments in the hopes of mitigating deficit bias. Using a generalized difference-in-differences model and rich administrative data, I find that municipalities with transferred central administrators in fact persistently improved fiscal discipline by shrinking expenditure and lowering debt. Voters seem to reward the incumbent mayor in the local election for better administration and fiscal conditions. Heterogeneity analyses reveal, though, that transferred administrators temporarily increase local expenditure and categorical grants in fields closely related to their respective departments.