Inter-regional transportation and economic productivity: a case study of regional agglomeration economies in Japan

This study investigates the benefit of agglomeration to regional productivity, highlighting the issue of accessibility with empirical data from Japan. We analyze empirically the impacts of agglomeration on regional economic return using an econometric approach, assuming three types of agglomeration economics: urbanization agglomeration, localization agglomeration, and mixed agglomeration. We estimate the agglomeration elasticities of 11 industries using inter-regional transportation network data and regional socioeconomic panel data for 1981, 1986, 1991, 1996, 2001, and 2006, covering 47 prefectures in Japan. Our results show that, on average, the indirect benefit of regional productivity improvement from localization agglomeration tends to be more significant than that from urbanization agglomeration. While the mining industry enjoys significant benefit from urbanization rather than localization agglomeration and the transportation/communication industry enjoys significant benefit from localization rather than urbanization agglomeration, finance/insurance and real estate can benefit from both agglomeration economies. We further find negative elasticities in the agriculture and service industries; this could be partly due to the industries’ characteristics. A case study on Japan shows the importance of coordination between land-use and transportation investment for maximizing regional productivity through agglomeration.