The Japan Times: Tohoku University named as first recipient in state subsidy program

Article published: 1 September, 2023

IB Economics syllabus: Microeconomics (government intervention, subsidies, market failure, allocation of resources)

Japan’s Push for Research Excellence: The Role of Government Subsidies

Tohoku University has been conditionally selected as the inaugural recipient of subsidies under Japan’s “Universities for International Research Excellence” program. This initiative, spearheaded by the education ministry, aims to provide financial support from the country’s substantial ¥10-trillion university fund. The primary objective is to bolster research excellence in Japanese universities. Additionally, with the subsidies set to commence as early as the next fiscal year, the ministry has indicated that multiple universities will be beneficiaries of this program in the future.

IB Economics Internal Assessment (IA) Commentary

The article from The Japan Times discusses a significant microeconomic issue: government intervention through subsidies in the education and research industries. This subsidy, aimed at promoting research excellence, can be analyzed in terms of its potential effects on the market for higher education in Japan. For instance, a supply and demand diagram would illustrate how the subsidy affects the equilibrium price (cost of research) and quantity (volume of research initiatives). On one hand, the subsidy could lead to an increase in research projects, enhancing the overall quality and breadth of academic endeavors, but on the other hand, it’s also important to consider potential drawbacks. Could there be an oversaturation in certain research fields?

Morover, might universities become overly reliant on these funds, potentially stifling innovation or diversification in the long run? Besides a simple supply/demand approach, you can also look at higher education in Japan as a merit good, leadong to positive consumption externalities. Hence with the subsidy, consumption would increase to be closer to the social optimum, decreasing the welfare loss of society. For a key concept, I’d use efficiency (think of market failure), or government intervention.

Source of image: KYODO

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