In this study, we conducted an empirical analysis of the impacts of social overhead capital, population agglomeration and industry structure on productive efficiency, focusing on Japan’s 47 prefectures. The analysis results showed that upgrading social overhead capital contributes to improved regional productive efficiency. At the same time, the economic effect of population agglomeration was clearly shown to increase productive efficiency. Moreover, regions that are heavily weighted toward manufacturing were shown to have high productive efficiency.
After investigating the degree to which each factor contributes to productivity gains in each region, it became clear that the largest contributor was industry structure. In other words, the transformation of industry structure appears to be indispensable for the sustainable development of regional economies. At the same time, upgrading social overhead capital was shown to contribute to some degree to such sustainable development. Meanwhile, high population agglomeration appeared to have a powerful economic effect in major metropolitan areas, such as Tokyo Metropolitan Area and Kansai. Due to its significant external effect, population agglomeration is predicted to realize economies of scale in Tokyo and Osaka.
This study demonstrated that upgrading social overhead capital has an effect on increasing productive efficiency, in addition to previously understood effects on productivity. Upgrading regional social overhead capital drives sustainable growth in regional economies through increases in productivity. Future studies should address regional analysis at a more detailed level, such as at the level of municipalities.
JEL Classification: R11, R30, R38