Relationships between Diversity and Changes in Municipal Tax Revenue : Empirical Results from Japan's Municipalities

This paper explores two relationships between tax revenue structures and tax revenue changes in Japan's municipalities from FY2009 to FY2013. Both the diversity and complexity of total tax revenue are measured by the Hirschman-Herfindahl Index. Total tax revenue stability and growth are measured by the income elasticity of total tax revenues in the short and long term, respectively. The main findings are that total tax revenue diversification can improve the stability of this revenue in the short term and that the complexity of total tax revenue can more rapidly increase this revenue in the long term.