Agglomeration Economies in Japan: Technical Efficiency, Growth and Unemployment

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.

Assessing agglomeration economies in the Yangzi River Delta, China : a bayesian spatial econometric approach

This paper estimates the elasticity of labor productivity with respect to employment density, a widely used measure of the agglomeration effect, in the Yangtze River Delta, China. A spatial Durbin model is presented that makes explicit the influences of spatial dependence and endogeneity bias in a very simple way. Results of Bayesian estimation using the data of the year 2009 indicate that the productivity is influenced by factors correlated with density rather than density itself and that spatial spillovers of these factors of agglomeration play a significant role. They are consistent with the findings of Ke (2010) and Artis, et al. (2011) that suggest the importance of taking into account spatial dependence and hitherto omitted variables.

Economies of Transport Density and Industrial Agglomeration

This paper develops a model of a spatial economy in which interregional trade patterns and the structure of the transport network are determined endogenously as a result of the interaction between industrial location behavior and increasing returns in transportation, in particular, economies of transport density. The traditional models assume either the structure of the transport network or industrial location patterns, and hence, they are unable to explain the interdependence of the two. It is shown that economies of transport density can be the primary source of industrial localization.

Agglomeration and firm-level productivity : a Bayesian spatial approach

This paper estimates the impact of industrial agglomeration on firm-level productivity in Chinese manufacturing sectors. To account for spatial autocorrelation across regions, we formulate a hierarchical spatial model at the firm level and develop a Bayesian estimation algorithm. A Bayesian instrumental-variables approach is used to address endogeneity bias of agglomeration. Robust to these potential biases, we find that agglomeration of the same industry (i.e. localization) has a productivity-boosting effect, but agglomeration of urban population (i.e. urbanization) has no such effects. Additionally, the localization effects increase with educational levels of employees and the share of intermediate inputs in gross output. These results may suggest that agglomeration externalities occur through knowledge spillovers and input sharing among firms producing similar manufactures.

Regional Cooperation of Small & Medium Firms in Japanese Industrial Clusters

This study examines the effects of intra-regional cooperation among firms and institutions on the growth of firms, using the unique data set of questionnaire survey collected in the three major industrial clusters in Japan. In contrast to the existing studies on regional innovations or agglomeration economies, this study explicitly focuses on the detailed contents of cooperative activities with two specific viewpoints: 1) the contents of regional cooperation in each of the three production stages of R&D, commercialization, and marketing, and 2) the detailed types of alliance partners. Our results demonstrate three points: 1) positive correlations are observed between the intensity of regional cooperation and the firm growth rate and R&D expenditure, 2) horizontal cooperation such as alliances with universities and cross-industry exchange organizations has positive significant effects on the growth rate of firms, which is in contrast with the previous studies that stressed only the role of vertically integrated inter-firm linkages in Japan, and 3) contents and partners of regional cooperation are different among the three clusters based on different dominant industries.

Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia

This paper proposes a new mechanism linking innovation and network in developing economies to detect explicit production and information linkages and investigates the testable implications of these linkages using survey data gathered from manufacturing firms in East Asia. We found that firms with more information linkages tend to innovate more, have a higher probability of introducing new goods, introducing new goods to new markets using new technologies, and finding new partners located in remote areas. We also found that firms that dispatched engineers to customers achieved more innovations than firms that did not. These findings support the hypothesis that production linkages and face‐to‐face communication encourage product and process innovation.

Agglomeration and directional imbalance of freight rates : the role of density economies in the transport sector

This paper examines the conventional assumption that bilateral transport costs are symmetric. We develop an economic geography model with transport sector in which asymmetric freight rates can occur as a result of density economies. Comparing this to models without density economies, we show that agglomeration of economic activities is more likely to emerge and that multiple equilibria can emerge for some parameters. Then we show the change in its bifurcation and stability of equilibrium and conclude that economies of density in transport flows can act as an agglomeration force.

Agglomeration versus Fragmentation:A Comparison of East Asia and Europe

Inspired by the observed contrasting patterns of industrial distribution in East Asia and Europe, this paper conducts an empirical clarification of the difference in spatial relationships among countries within a region for the electric machinery industry by use of spatial econometric analysis. The results indicate that, while production in the electric machinery industry in a country is positively correlated with that of neighboring countries in East Asia, there is no significant spatial correlation in Europe. Such a difference in spatial interdependence has important implications for economic development in those regions.

Spatial spillovers from FDI agglomeration : evidence from the Yangtze River Delta in China

Foreign firms have clustered together in the Yangtze River Delta, and their impact on domestic firms is an important policy issue. This paper studies the spatial effect of FDI agglomeration on the regional productivity of domestic firms, using Chinese firm-level data. To identify local FDI spillovers, we estimate the causal impact of foreign firms on domestic firms in the same county and similar industries. We then estimate a spatial-autoregressive model to examine spatial spillovers from FDI clusters to other domestic firms in distant counties. Our results show that FDI agglomeration generates positive spillovers for domestic firms, which are stronger in nearby areas than in distant areas.

Agglomeration effects of informal sector: evidence from Cambodia

The presence of a large informal sector in developing economies poses the question of whether informal activity produces agglomeration externalities. This paper uses data on all the nonfarm establishments and enterprises in Cambodia to estimate the impact of informal agglomeration on the regional economic performance of formal and informal firms. We develop a Bayesian approach for a spatial autoregressive model with an endogenous explanatory variable to address endogeneity and spatial dependence. We find a significantly positive effect of informal agglomeration, where informal firms gain more strongly than formal firms. Calculating the spatial marginal effects of increased agglomeration, we demonstrate that more accessible regions are more likely than less accessible regions to benefit strongly from informal agglomeration.

Industrial agglomeration in Costa Rica : a descriptive analysis

This paper investigates the current situation of industrial agglomeration in Costa Rica, utilizing firm-level panel data for the period 2008-2012. We calculated Location Quotient and Theil Index based on employment by industry and found that 14 cantons have the industrial agglomerations for 9 industries. The analysis is in line with the nature of specific industries, the development of areas of concentration around free zones, and the evolving participation of Costa Rica in GVCs.

Stability of complementarity between Japanese FDI and import of intermediate goods : agglomeration effects and parent-firm heterogeneity

This paper examines the duration of intermediate goods imports and its determinants for Japanese affiliates in China. Our estimations, using a unique parent-affiliate-transaction matched panel dataset for a discrete-time hazard model over the 2000–2006 period, reveal that products with a higher upstreamness index, differentiated goods, and goods traded under processing trade are less likely to be substituted with local procurement. Firms located in more agglomerated regions with more foreign affiliates tend to shorten the duration of imports from the home country. For parent-firm characteristics, multinational enterprises that have many foreign affiliates or longer foreign production experience import intermediate goods for a longer duration.

Post-decentralization regional economies and actors -- putting the capacity of Local governments to the test

Decentralization in Indonesia was introduced institutionally in 2001, with a democratization drive promoted by international donors and by the intention of the new government to clear away the centralistic image of Soeharto. Decentralization has had some effects on regional economies and on local government administration. Compared to the period before decentralization, the share of gross regional domestic product and local government finance has increased in Java, though investment and bank borrowing have expanded to the outer islands. In qualitative aspects, decentralization has transferred not only administrative authority but also many new vested interests from the center to regions. Local governments have become more extensive economic actors in regional economies. Regional economic actors now compete actively for such vested interests and have missed the opportunity to create market-friendly regional economies. The government sector should not be a mere rent-seeking economic actor, but should play a role as a facilitator promoting private sector activities in regional economies.

Business Cycles of Non-mono-cultural Developing Economies: The Case of ASEAN Countries

Based on analyses of actual data, we reveal that many Asian developing economies own economic structural features of "non-mono-cultural economy" and the "large primary good sector", which have not been discussed in developing economies RBC literature. We also examine the input-output tables to develop a model reflecting actual developing economies' structures. Referring to the analyses, we construct RBC models of ASEAN countries. Based on the model, we find that approximately half of GDP volatility is attributable to domestic productivity shocks, and the remaining half is attributable to price shocks.

Frontiers of the New Economic Geography

This paper presents an overview of recent development in the new economic geography (NEG), and discusses possible directions of its future development. Since there already exist several surveys on this topic, we focus on the selected features of the NEG which are important yet have attracted insufficient attention, and also on the recent refinements and extensions of the framework.