Economies of Density and Productivity in Service Industries: An Analysis of Personal Service Industries Based on Establishment-Level Data

Masayuki Morikawa

The Review of Economics and Statistics, 2011, vol. 93, issue 1, 179-192

Abstract: This study aims to empirically investigate the determinants of service industry productivity, such as economies of scale and economies of density. By using establishment-level data related to personal service industries in Japan, the study estimates the production functions for both value-added and physical output measures. In almost all the service industries examined, significant economies of scale and economies of density are observed, wherein productivity increases by 7%% to 15%% when the municipality population density doubles. These findings are confirmed by an estimation in which the measures of physical output are considered instead of value added. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2011
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Working Paper: Economies of Density and Productivity in Service Industries: An Analysis of Personal-Service Industries Based on Establishment-Level Data (2008)
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