Empirical Analysis of Agglomeration Economies in Urban Manufacturing Industries

Abstract

This paper empirically investigates the effects of urban agglomeration economies on productivities in two-digit manufacturing industries using the cross section data of Japanese cities for 1979. It focuses on urbanization and localization economies, which are two major forms of external agglomeration economies, and tries to estimate the effects of thess two economies separately in industrial activities. The findings are; (1) light indusries receive more productive advantages from urbanization economies than from localization economies, the situation is the other way round for heavy industries, and (2) firms in most manufacturing industries receive more productive advantages from being located at cities in metropolitan areas than at very large cities, indicating the consistency with the recent trend of manufacturing firms to move from a large central cities to medium-sized cities within the metropolitan area.