Agglomeration Economies in Japan: Technical Efficiency, Growth and Unemployment

Mitra Arup and Sato Hajime

No 48, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: This paper examines if the effects of agglomeration economies get manifested in technical efficiency and generate faster economic growth and higher (lower) levels of employment (unemployment). Using the prefecture level data for each of the two-digit groups of industries in Japan, the paper estimates region-specific technical efficiency index based on the stochastic frontier production function framework. The results of the factor analysis show that in most of the industry-groups (with a few exceptions) efficiency has a positive association with external scale variable(s). Though the relationship is not seen to be very strong, it would be equally erroneous to ignore the effect of agglomeration economies on efficiency. In the case of some of the light goods industries the agglomeration effect is relatively stronger. Further, economic growth varies positively with external scale variable(s) and unemployment rate tends to fall with respect to growth and concentration. All this tends to suggest that measures against industrial concentration may be counter-productive, particularly in the context of globalisation when countries are in dire need of raising productivity.

Keywords: Agglomeration economies; Technical efficiency; Economic conditions; Economic growth; Manufacturing industries; Unemployment; Japan; 経済事情; 経済成長; 製造業; 失業; 日本 (search for similar items in EconPapers)
JEL-codes: J60 L60 R12 (search for similar items in EconPapers)
Date: 2006-02-01
New Economics Papers: this item is included in nep-eff, nep-geo and nep-ure
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Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 48. 2006-02-01

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