Urbanization without Industrialization: Evidence from US Bases in Okinawa

Ikuto Aiba and Atsushi Yamaghishi
Authors registered in the RePEc Author Service: Atsushi Yamagishi

No 767, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: We examine how the inflow of external income shapes the pattern of urbanization and the economic structure. We focus on the unique case of Okinawa in Japan, where many US military bases were constructed for strategic reasons and the income inflow from them accounted for up to 40% of the aggregate income. Using newly digitized data, we first document rapid urbanization near the bases, driven by service sector expansion rather than manufacturing. We then develop a new quantitative spatial model and calibrate it to the Okinawan economy in 1970. Our counterfactual analysis highlights that the US-base related income was crucial to urbanization without industrialization. Contrary to Dutch disease concerns, we find that such urbanization without industrialization significantly increased aggregate income and welfare.

Keywords: Urbanization; Service sector; Quantitative spatial model; Military bases; Okinawa (search for similar items in EconPapers)
JEL-codes: N40 O14 O18 R11 R12 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2025-05
New Economics Papers: this item is included in nep-geo and nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:767

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