Market Size, Linkages, and Productivity: A Study of Japanese Regions

Donald Davis (drd28@columbia.edu) and David Weinstein

No 8518, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: One account of spatial concentration focuses on productivity advantages arising from market size. We investigate this for forty regions of Japan. Our results identify important effects of a region's own size, as well as cost linkages between producers and suppliers of inputs. Productivity links to a more general form of 'market potential' or Marshall-Arrow-Romer externalities do not appear to be robust in our data. Landlocked status does not matter for productivity of regions in Japan. The effects we identify are economically quite important, accounting for a substantial portion of cross-regional productivity differences. A simple counterfactual shows that if economic activity were spread evenly over the forty regions of Japan, aggregate output would fall by nearly twenty percent.

JEL-codes: F1 R1 (search for similar items in EconPapers)
Date: 2001-10
New Economics Papers: this item is included in nep-eff and nep-sea
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Published as Kanbur, Ravi and Anthony Venables (eds.) Spatial Inequality and Development. Oxford: Oxford U. Pr., 2005.

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