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Purpose

To explain a fiscal rule that functions in a different way from a constitutional ideal of a welfare state, as Japan's case, and to give a literary examination of that kind of thoughts in modern economics and theory of public finance.

Design/methodology/approach

Compares neo‐institutional economics and fiscal sociology about the role of a government, using recent fiscal data of developed countries.

Findings

For neo‐institutional economics it is difficult to explain “welfare state” that substitutes the role of a family because the approach can only explain a complementary relationship of organizations in higher levels with lower organizations.

Practical implications

Points out that neo‐institutional economics should be examined by a historical formation of each rule and a real legal system in each country.

Originality/value

Discusses institutional economics and fiscal sociology from an aspect of possibility of applying to the field of public finance and social welfare.

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