2012 Volume 42 Issue 4 Pages 847-869
Japanese economic growth has slowed since the1990s so regional inequality has increased and local economies have suffered recessions. Measuring Total Factor Productivity (TFP) is crucial for considering growth of the regional economies and industries. This paper examines the impacts of industrial agglomeration on regional economic growth of Japanese Prefectures, and compares their regional characteristics. We measured TFP for Japanese manufacturing, wholesale and retail trade, and service industries, such as information service industries, golf courses, movie theaters, and fitness clubs, by using the current survey of production and commerce, and the survey of selected services.
The results of our analysis are summarized as follows. First, the effects on TFP growth rate decomposition in manufacturing industries was large and reallocation was very small, so it is unclear whether industrial agglomeration affects regional economic growth. Second, within, between and covariance effects were positive and relatively higher for TFP growth rate decomposition in wholesale industries. In addition, wholesale productivity was improved in the urban economy. However, within effects were actually negative for the period 1999 to 2007 in the retail trade industries and retail trade productivity declined in the regional economy. Third, within effects were large and between effects were negative for TFP growth rate decomposition in the information service industries. With regard to golf courses, movie theaters and fitness clubs, regional disparities in productivity were reduced.
JEL Classification: D24, O47, R11
