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Inter-regional transportation and economic productivity: a case study of regional agglomeration economies in Japan

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Abstract

This study investigates the benefit of agglomeration to regional productivity, highlighting the issue of accessibility with empirical data from Japan. We analyze empirically the impacts of agglomeration on regional economic return using an econometric approach, assuming three types of agglomeration economics: urbanization agglomeration, localization agglomeration, and mixed agglomeration. We estimate the agglomeration elasticities of 11 industries using inter-regional transportation network data and regional socioeconomic panel data for 1981, 1986, 1991, 1996, 2001, and 2006, covering 47 prefectures in Japan. Our results show that, on average, the indirect benefit of regional productivity improvement from localization agglomeration tends to be more significant than that from urbanization agglomeration. While the mining industry enjoys significant benefit from urbanization rather than localization agglomeration and the transportation/communication industry enjoys significant benefit from localization rather than urbanization agglomeration, finance/insurance and real estate can benefit from both agglomeration economies. We further find negative elasticities in the agriculture and service industries; this could be partly due to the industries’ characteristics. A case study on Japan shows the importance of coordination between land-use and transportation investment for maximizing regional productivity through agglomeration.

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Notes

  1. The administrative divisions of Japan can be divided into two levels. The upper tier is called “Prefecture”; this consists of 47 prefecture in Japan. The lower tier is called “Municipality”; there are several municipalities in one prefecture. Presently (2017), there are 1742 municipalities in Japan; this could be decreased due to depopulation in Japan. However, each prefecture and municipality may have different levels of autonomy based on its sub-classification. For example, Tokyo Prefecture, Osaka Prefecture, and Hokkaido Prefecture may have higher levels of autonomy than other prefectures. At the municipality level, a large municipality specified as “Designated City” has a higher level of autonomy than the other municipality sub-classifications.

  2. NUTS, or Nomenclature of Territorial Units for Statistics, is a subdivision code used in EU. The NUTS2 level indicates a population range of 800,000–3,000,000. The prefecture-level population of Japan has a range of 600,000–12,000,000.

  3. The firm selection approach explains the better productivity from agglomeration resulting from the intensive competition in larger markets. Only the best firms can survive competition, resulting in better overall productivity in a large market compared to a smaller market.

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  1. Department of Civil Engineering, The University of Tokyo, 7-3-1, Hongo, Bunkyo-ku, Tokyo, 113-8656, Japan

    Jetpan Wetwitoo & Hironori Kato

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  1. Jetpan Wetwitoo
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  2. Hironori Kato
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Correspondence to Jetpan Wetwitoo.

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Wetwitoo, J., Kato, H. Inter-regional transportation and economic productivity: a case study of regional agglomeration economies in Japan. Ann Reg Sci 59, 321–344 (2017). https://doi.org/10.1007/s00168-017-0833-6

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  • DOI: https://doi.org/10.1007/s00168-017-0833-6

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