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.

Interindustrial Structure in the Asia-Pacific Region: Growth and Integration, by Using 2000 AIO Table

Over the past 20 years Asian countries have achieved a certain degree of economic growth and at the same time deepened spatial interdependence. In January 2006, IDE completed the 2000 Asian International Input-Output Table, which covers eight major East Asian countries/regions as well as Japan and the United States. Given the dynamic changes in the economies of East Asia, this paper attempts to summarize the characteristics and their patterns of change in industrial structures and trade structures of the countries/regions in the Asia-Pacific region from the three viewpoints of time, space, and industry, by using the AIO table for 1985, 1990, 1995, and 2000.

Is South Sulawesi a Center of Growth in Eastern Indonesia? : Japanese ODA Strategy Revisited

Japanese ODA, especially that undertaken by JICA, has targeted South Sulawesi Province as a core area of development in eastern Indonesia, with hope that the economic growth of South Sulawesi will bring about spillover effects in other regions. This paper tests the validity of the strategy using a framework of Vector Autoregressive model. The results show that South Sulawesi’s economy Granger causes other regions in eastern Indonesia, but not vice versa, implying that South Sulawesi drives the development of other regions in eastern Indonesia. Further analysis shows that the development of the agricultural sector in South Sulawesi potentially has the highest spillover effects than other sectors and that the magnitude of spillover effect from South Sulawesi on eastern Indonesia is higher than other economically important regions, such as Eastern Java and Kalimantan.

The Feasibility of Cuban Market Economy: A Comparison with Vietnam

In spite of the difficulties incurred by its people, Cuba has maintained a centrally planned economy with single party system. On the contrary, Vietnam has introduced a market economy under communist rule, and succeeded in generally improving living standards. The factors that contributed to the introduction of Vietnamese-style reforms are (1) severe economic crisis, (2) demonstration effects from neighboring countries, (3) poor social policy, (4) initiatives by ex-conservative leader/s, and (5) weak state capacity. The conditions to sustain high economic growth are (1) social sectors familiar with capitalist economics, (2) abundant labor forces with relatively low labor cost, and (3) investment by exiles. This paper analyzes to what extent Cuba meets these conditions.

Chapter 3 Industrial Location in Cambodia: Industrial Policies and Economic Statistics

Cambodia has experienced high economic growth in the last decade. Because most of its industries were destroyed during the Pol Pot regime and civil war, in the last 20 years the country has been working hard to liberalize its economy to attract foreign investors With its efforts to join the regional and international community and with changes in the international trade environment, Cambodia started to grow its economy in the late 1990s. Now, in the early 21st century, the Cambodian economy seems to be prepared to take off. We can observe a kind of industrial agglomeration occurring, even though still at a small scale. In this paper, first, I will review the history of Cambodia’s economic development since the late 1980s. Second, I will examine the economic policies, laws, rules, and other environmental factors which have influenced industrial development and industrial location in Cambodia. Third, I will introduce industrial location in the late 2000s. Lastly, I will introduce some statistical data for the future analysis of industrial location in Cambodia.

Chapter 6 Economic integration and changes in industrial location in Vietnam

Vietnam has been praised for its achievements in economic growth and success in poverty reduction over the last two decades. The incidence of poverty reportedly fell from 58.1% in 1993 to 19.5% in 2004 (VASS [2006, 13]). The country is also considered to have only a moderate level of aggregate economic inequality by international comparisons. As of the early 2000s, Vietnam’s consumption-based Gini coefficient is found to be comparable to that of other countries with similar levels of per capita GDP. The Gini index did increase between 1993 and 2004, but rather slowly, from 0.34 to 0.37 (VASS [2006, 13]). Yet, as the country moves on with its market oriented reforms, the question of inequality has been highlighted in policy and academic discourses. In particular, it is pointed out that socio-economic inequalities between regions (or provinces) are significant and have been widening behind aggregate figures (NCSSH [2001], Mekong Economics [2005], VASS [2006]). Between 1993 and 2004, while real per capita expenditure increased in all regions, it grew fastest in those regions with the highest per capita expenditures and vice versa, resulting in greater regional disparities (VASS [2006, 37]). A major contributing factor to such regional inequalities is the uneven distribution of industry within the country. According to the Statistical Yearbook of Vietnam, of the country's gross industrial output in 2007, over 50% belongs to the South East region, close to 25% to the Red River Delta, and about 10% to the Mekong River Delta. All remaining regions share some 10% of the country's gross industrial output. At a quick glance, the South East increased its share of the total industrial gross output in the 1990s, while the Red River Delta started to gain ground in more recent years. How can the government deal with regional disparities is a valid question. In order to offer an answer, it is necessary in the first place to grasp the trend of disparities as well as its background. To that end, this paper is a preparatory endeavor. Regional disparities in industrial activities can essentially be seen as a result of the location decisions of enterprises. While the General Statistics Office (GSO) of Vietnam has conducted one enterprise census (followed by annual enterprise surveys) and two stages of establishment censuses since 2000, sectorally and geographically disaggregated data are not readily available. Therefore, for the moment, we will draw on earlier studies of industrial location and the determinants of enterprises’ location decisions in Vietnam. The remainder of this paper is structured as follows. The following two sections deal with the country context. Section 2 will outline some major developments in Vietnam’s international economic relations that may affect sub-national location of industry. According to the theory of spatial economics, economic integration is seen as a major driver of changes in industrial location, both between and within countries (Nishikimi [2008]). Section 3, on the other hand, will consider some possible factors affecting geographic distribution of industry in the domestic sphere. In Section 4, existing literature on industrial and firm location will be examined, and Section 5 will briefly summarize the findings and suggest some areas for future research.

Chapter 8 Location Choice of Japanese Multinationals: Country Characteristics or Region Characteristics?

In the present global era in which firms choose the location of their plants beyond national borders, location characteristics are important for attracting multinational enterprises (MNEs). The better access to countries with large market is clearly attractive for MNEs. For example, special treatments on tariffs such as the Generalized System of Preferences (GSP) are beneficial for MNEs whose home country does not have such treatments. Not only such country characteristics but also region characteristics (i.e. province-level or city-level ones) matter, particularly in the case that location characteristics differ widely between a nation's regions. The existence of industrial concentration, that is, agglomeration, is a typical regional characteristic. It is with consideration of these country-level and region-level characteristics that MNEs decide their location abroad. A large number of academic studies have investigated in what kinds of countries MNEs locate, i.e. location choice analysis. Employing the usual new economic geography model (i.e. constant elasticity of substitution (CES) utility function, Dixit-Stiglitz monopolistic competition, and ice-berg trade costs), the literature derives the profit function, of which coefficients are estimated using maximum likelihood procedures. Recent studies are as follows: Head, Rise, and Swenson (1999) for Japanese MNEs in the US; Belderbos and Carree (2002) for Japanese MNEs in China; Head and Mayer (2004) for Japanese MNEs in Europe; Disdier and Mayer (2004) for French MNEs in Europe; Castellani and Zanfei (2004) for large MNEs worldwide; Mayer, Mejean, and Nefussi (2007) for French MNEs worldwide; Crozet, Mayer, and Mucchielli (2004) for MNEs in France; and Basile, Castellani, and Zanfei (2008) for MNEs in Europe. At the present time, three main topics can be found in this literature. The first introduces various location elements as independent variables. The above-mentioned new economic geography model usually yields the profit function, which is a function of market size, productive factor prices, price of intermediate goods, and trade costs. As a proxy for the price of intermediate goods, the measure of agglomeration is often used, particularly the number of manufacturing firms. Some studies employ more disaggregated numbers of manufacturing firms, such as the number of manufacturing firms with the same nationality as the firms choosing the location (e.g., Head et al., 1999; Crozet et al., 2004) or the number of firms belonging to the same firm group (e.g., Belderbos and Carree, 2002). As part of trade costs, some investment climate measures have been examined: free trade zones in the US (Head et al., 1999), special economic zones and opening coastal cities in China (Belderbos and Carree, 2002), and Objective 1 structural funds and cohesion funds in Europe (Basile et al., 2008). Second, the validity of proxy variables for location elements is further examined. Head and Mayer (2004) examine the validity of market potential on location choice. They propose the use of two measures: the Harris market potential index (Harris, 1954) and the Krugman-type index used in Redding and Venables (2004). The Harris-type index is simply the sum of distance-weighted real GDP. They employ the Krugman-type market potential index, which is directly derived from the new economic geography model, as it takes into account the extent of competition (i.e. price index) and is constructed using estimators of importing country dummy variables in the well-known gravity equation, as in Redding and Venables (2004). They find that "theory does not pay", in the sense that the Harris market potential outperforms Krugman's market potential in both the magnitude of its coefficient and the fit of the model to be estimated. The third topic explores the substitution of location by examining inclusive values in the nested-logit model. For example, using firm-level data on French investments both in France and abroad over the 1992-2002 period, Mayer et al. (2007) investigate the determinants of location choice and assess empirically whether the domestic economy has been losing attractiveness over the recent period or not. The estimated coefficient for inclusive value is strongly significant and near unity, indicating that the national economy is not different from the rest of the world in terms of substitution patterns. Similarly, Disdier and Mayer (2004) investigate whether French MNEs consider Western and Eastern Europe as two distinct groups of potential host countries by examining the coefficient for the inclusive value in nested-logit estimation. They confirm the relevance of an East-West structure in the country location decision and furthermore show that this relevance decreases over time. The purpose of this paper is to investigate the location choice of Japanese MNEs in Thailand, Cambodia, Laos, Myanmar, and Vietnam, and is closely related to the third topic mentioned above. By examining region-level location choice with the nested-logit model, I investigate the relative importance of not only country characteristics but also region characteristics. Such investigation is invaluable particularly in the case of location choice in those five countries: industrialization remains immature in those countries which have not yet succeeded in attracting enough MNEs, and as a result, it is expected that there are not yet crucial regional variations for MNEs within such a nation, meaning the country characteristics are still relatively important to attract MNEs. To illustrate, in the case of Cambodia and Laos, one of the crucial elements for Japanese MNEs would be that LDC preferential tariff schemes are available for exports from Cambodia and Laos. On the other hand, in the case of Thailand and Vietnam, which have accepted a relatively large number of MNEs and thus raised the extent of regional inequality, regional characteristics such as the existence of agglomeration would become important elements in location choice. Our sample countries seem, therefore, to offer rich variations for analyzing the relative importance between country characteristics and region characteristics. Our empirical strategy has a further advantage. As in the third topic in the location choice literature, the use of the nested-logit model enables us to examine substitution patterns between country-based and region-based location decisions by MNEs in the concerned countries. For example, it is possible to investigate empirically whether Japanese multinational firms consider Thailand/Vietnam and the other three countries as two distinct groups of potential host countries, by examining the inclusive value parameters in nested-logit estimation. In particular, our sample countries all experienced dramatic changes in, for example, economic growth or trade costs reduction during the sample period. Thus, we will find the dramatic dynamics of such substitution patterns. Our rigorous analysis of the relative importance between country characteristics and region characteristics is invaluable from the viewpoint of policy implications. First, while the former characteristics should be improved mainly by central government in each country, there is sometimes room for the improvement of the latter characteristics by even local governments or smaller institutions such as private agencies. Consequently, it becomes important for these smaller institutions to know just how crucial the improvement of region characteristics is for attracting foreign companies. Second, as economies grow, country characteristics become similar among countries. For example, the LCD preferential tariff schemes are available only when a country is less developed. Therefore, it is important particularly for the least developed countries to know what kinds of regional characteristics become important following economic growth; in other words, after their country characteristics become similar to those of the more developed countries. I also incorporate one important characteristic of MNEs, namely, productivity. The well-known Helpman-Melitz-Yeaple model indicates that only firms with higher productivity can afford overseas entry (Helpman et al., 2004). Beyond this argument, there may be some differences in MNEs' productivity among our sample countries and regions. Such differences are important from the viewpoint of "spillover effects" from MNEs, which are one of the most important results for host countries in accepting their entry. The spillover effects are that the presence of inward foreign direct investment (FDI) aises domestic firms' productivity through various channels such as imitation. Such positive effects might be larger in areas with more productive MNEs. Therefore, it becomes important for host countries to know how much productive firms are likely to invest in them. The rest of this paper is organized as follows. Section 2 takes a brief look at the worldwide distribution of Japanese overseas affiliates. Section 3 provides an empirical model to examine their location choice, and lastly, we discuss future works to estimate our model.

Chapter 3 Knowledge Exchanges and Innovation in Connected Firms: Evidence from Upstream-Downstream Relationships

This paper proposes evidences for linking innovation and knowledge exchanges in developing economies towards a comprehensive theory of new economic geography in the knowledge based spatial economy. Firms which dispatched engineers to customers achieved more innovations than firms which did not. Mutual sharing of knowledge also stimulates innovations. A just-in-time relationship is effective for dealing with upgrading production process. But such strong complementarities with partners are not effective for product innovation.. These evidences support the hypothesis that face-to-face communication and complementarities among production linkages have different roles in knowledge creation.

Growth and public finance in Bihar

This paper explores the causal links between the role of public finance and Bihar's growth and development in the last decade; and argues that these links are tenuous. Bihar's growth acceleration precedes the ‘policy reforms' in public finance based on the ‘good governance' agenda initiated since 2005-06. However, the constraints on sustaining efforts to close Bihar's development gap with the rest of India stems from the nature of the growth process in its regional, sectoral and social dimensions and the contradictory means and ends of the ‘policy reforms' in public finance. Together, this has not only prevented the economic growth to add to public coiffeurs of the state but also occluded the role of tax institutions.

Agriculture Plus Plus : growth strategy for Myanmar agriculture

The development of agriculture is a main pillar of Myanmar’s growth strategies. It is natural for the Myanmar government to prioritize agriculture as a source of economic growth, since it accounted for 36% of GDP, employs a majority of labor force, and generates nearly 30% of exports as of 2010. Although the agricultural share in GDP and employment usually declines as an economy grows, it is not a sunset industry in Myanmar. Methods exist for increasing agriculture’s value added other than the growth of labor and land inputs. The key is to enhance three productivity measures: labor, land, and total productivity. We call this strategy "Agriculture Plus Plus."

Two-polar growth strategy in Myanmar : seeking "high" and "balanced" development

The Thein Sein government of Myanmar seeks higher and balanced economic growth. This is a challenge for the government since some economic literature identifies a trade-off between higher economic growth and better regional equality, especially for countries in the early stages of development. In this paper, we propose a two-polar growth strategy as one that includes both "high" and "balanced" growth. The first growth pole is Yangon, and the second is Mandalay. Nay Pyi Taw, the national capital, will develop as an administrative centre, not as an economic or commercial one. We also propose border development with enhanced connectivity with richer neighboring countries as a complementary strategy to the two growth poles. Effects of the two-polar growth strategy with border development are tested using a Geographical Simulation Model (GSM).

Input-output-based genuine value added and genuine productivity in China's industrial sectors (1995-2010)

The rapid growth of China's economy has brought about huge losses of natural capital in the form of natural resource depletion and damages from carbon emissions. This paper recalculates value added, capital formation, capital stock, and related multifactor productivity in China's industrial sectors by further developing the genuine savings method of the World Bank. The sector-level natural capital loss was calculated using China's official input–output table and their extensions for tracing final consumers. The capital output elasticity in the productivity estimation was adjusted based on these tables. The results show that although the loss of natural capital in China's industrial sectors in terms of value added has slowed, the impacts on their productivity during the past decades is still quite clear.

The source of sustainable growth in Costa Rica

Costa Rica has some concerns for the "middle income trap" stemming from her perceived weakening export competitiveness, intensifying competition in attracting FDI inflow; and apparent lack of innovation capabilities. Quantitative analyses on the impact of recent FTAs suggest only large firms benefit from FTAs suggesting the need for improving utilization by smaller firms. Continuing attraction of potential MNCs backed by human capital development is necessary. In pursuing its development goals, Costa Rica should be mindful of its reputation as an environmentally friendly place.

Public support for the deployment of next generation access networks-Common themes, methodological caveats and further research

Next generation telecommunications infrastructures are considered as a principal example of a new technology for sustainable economic growth. From their deployment it is expected that a wealth of innovations – hopefully converted into economic growth – new sources of employment and improved quality of life will result. In line with these prospects, public administrations at supranational, national, regional and local levels have encouraged the development of these new infrastructures. Moreover, in times of economic crisis, public assistance to deploy such networks encompasses the promise of placing a weak economy on the road to prosperity. However, such arguments and political claims clearly require rigorous assessment. In particular, any such assessment must adequately address the appropriate form of modelling that best captures key elements for identifiable progress from next generation access networks (NGAN).