Abstract
Examining Japanese micro-data, this study demonstrates that large core sectors (specialized or manufacturing sectors) in a local economy improve the productivity in the local non-tradable service sectors, and thereby increase employment. The size of service sector demand is determined by the size of the local economy, which, in turn, is determined by these large core sectors. The core sectors are generally sectors with tradable goods and services and their demand is not limited by the local market size as their goods and services supply multiple regions. A large demand for the service sectors induces heightened competition and improves their productivity through Darwinian selection or efficiency improvements within firms. Moreover, the spillover effect from core sectors might affect local service sectors. As a result, a 1% increase in added value in the specialized sectors in the previous estimation period, as well as a 1% increase in the change in added value in the specialized sectors, and a 1% increase in added value in the manufacturing sectors in the previous estimation period affect an increase in the productivity of the service sectors by approximately 4–5, 4 and 2.5%, respectively. Moreover, an increase of 100 thousand dollars of added value in the specialized sectors increases employment by 26 employees in the local service sectors. Furthermore, this study confirms efficiency improvements within firms as a productivity mechanism.
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Source The Basic Survey of Japanese Business Structure and Activities for the added value and the population census for the density of population
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Notes
Some service sectors, such as computer software, information, and technology can trade their products and services outside the region where these are produced. This study investigates service sectors that include non-tradable local services such as retail, hospitals, and places to drink and eat.
Excluding two municipalities, Chiyoda-ku where the imperial palace and cabinet-level ministry and agency are located and Chuo-ku where large commercial facilities and headquarter buildings agglomerate.
Results are available upon request.
The results are available upon request.
However, Morikawa (2016) argues the flexibility of labor demand increases the productivity of the service sectors.
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Acknowledgements
The author thanks the participants of the 20th Eurasia Business and Economic Society Conference, 14th Global Conference on Business and Economics, and the 15th international convention of the East Asian Economic Association for their very helpful comments. The author is also thankful for the financial support provided by the Japan Society for the Promotion of Science (Grant Number: 25380377).
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Kazekami, S. Do service sectors need core sectors to improve their productivity?. Eurasian Econ Rev 7, 389–410 (2017). https://doi.org/10.1007/s40822-017-0073-1
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DOI: https://doi.org/10.1007/s40822-017-0073-1
Keywords
- Productivity of service sectors
- Employment in service sectors
- Local economy
- Manufacturing sectors
- Specialized sectors