Interregional productivity differentials: a shift-share decomposition analysis and its application to post-war Japan
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This study proposes a squared employment-weighted coefficient of variation through a shift-share decomposition analysis, addressing the disadvantage of Esteban’s (Reg. Sci. Urban Econ. 30:353–364, 2000) variance measure. The aim is to analyze the role of each shift-share component in explaining interregional inequality in productivity per worker. Applying this inequality decomposition approach to prefectural data in post-war Japan generates several empirical results. One of the most interesting results is that the productivity differential component, which can be attributed to the region-specific sectoral productivity differential, was a dominant contributor throughout the period, although its values varied by year. Considering that the productivity differential component as an index of accumulated past investments within a given sector, its yearly variation indicates alternating policy shifts in the regional allocation of investment. This is consistent with the empirical result of Kataoka (Rev. Urban Reg. Dev. Stud. 17:115–139, 2005) that the regional development policy in post-war Japan alternated between efficiency-oriented investment allocation, which implies greater investment in higher-productivity regions, and equity-oriented investment allocation, which implies greater investment in lower-productivity regions. Moreover, the divergence in the interprefectural inequality of sectoral productivity differentials and the convergence in the interprefectural inequality of the sectoral employment share, observed from the mid-1970s, imply the advance of interregional division of labor, which may result from the agglomeration of the knowledge-intensive activities in Tokyo regions. This interregional relocation was described as Tokyo monopolar regional system by Fujita and Tabuchi (Reg. Sci. Urban Econ. 27:643–667, 1997).
KeywordsInequality decomposition Interregional inequality Shift-share analysis Post-war Japan
JEL ClassificationD63 O40 R11 R58
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