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Industrial diversity and metropolitan unemployment rate

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  • Keizo Mizuno

    ()

  • Fumitoshi Mizutani

    ()

  • Noriyoshi Nakayama

    ()

Abstract

Although it has for years had a lower unemployment rate than other industrialized countries, Japan has begun to see an increase in unemployment since its economy was hit by the recession of the late 90?s. The level of a nation?s unemployment is commonly seen as a barometer of its economy?s health, so that Japan?s increased unemployment has worried the government and prompted it to consider several policy options. Unemployment rate in Japan varies by region. In general, while large metropolitan areas such as Tokyo have lower unemployment rates, smaller metropolitan areas have higher unemployment. Strangely, however, Osaka, the second largest metropolitan area after Tokyo, is suffering from a high unemployment rate. In October of 2002, the Kansai region including the Osaka metropolitan area recorded an unemployment rate of 7.2%, much higher than the average rate (5.5%). Theoretically, regional differentials of the unemployment rate are attributed to the friction resulting from adjusting for the mismatch between demand and supply of labor markets among regions. These frictional factors consist of the costs of information, moving, transactions related to housing, and psychological costs. Frictional components are important factors but are not all. Industrial structure differences also affect regional differentials of the unemployment rate. This paper investigated the relationship between unemployment rate and industrial structure in metropolitan areas, with the aim of testing the hypothesis that more industrially diversified metropolitan areas have lower unemployment rates. Previous studies have been done on the relationship between industrial diversity and unemployment rate but these do not provide concrete agreement because of the failure to control other factors affecting unemployment rate. This paper follows the theoretical justification of Simon (1988), who argues that industrial diversity attains a lower unemployment rate by assuming that the frictional component

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Bibliographic Info

Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 40 (2006)
Issue (Month): 1 (March)
Pages: 157-172

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Handle: RePEc:spr:anresc:v:40:y:2006:i:1:p:157-172

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Keywords: J6; L1; R1; R5;

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References

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  1. John R. Kort, 1981. "Regional Economic Instability and Industrial Diversification in the U.S," Land Economics, University of Wisconsin Press, vol. 57(4), pages 596-608.
  2. Diamond, Charles A & Simon, Curtis J, 1990. "Industrial Specialization and the Returns to Labor," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 175-201, April.
  3. Oded Izraeli & Kevin J. Murphy, 2003. "The effect of industrial diversity on state unemployment rate and per capita income," The Annals of Regional Science, Springer, vol. 37(1), pages 1-14, 02.
  4. Merlin M. Hackbart & Donald A. Anderson, 1975. "On Measuring Economic Diversification," Land Economics, University of Wisconsin Press, vol. 51(4), pages 374-378.
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Cited by:
  1. Gnidchenko, Andrey, 2010. "Defragmentation of Economic Growth with a Focus on Diversification: Evidence from Russian Economy," MPRA Paper 27113, University Library of Munich, Germany.
  2. Shu-hen Chiang, 2009. "Location quotient and trade," The Annals of Regional Science, Springer, vol. 43(2), pages 399-414, June.
  3. Shu-hen Chiang, 2009. "The effects of industrial diversification on regional unemployment in Taiwan: is the portfolio theory applicable?," The Annals of Regional Science, Springer, vol. 43(4), pages 947-962, December.
  4. FU, Shihe & DONG, Xiaofang & CHAI, Guojun, 2010. "Industry specialization, diversification, churning, and unemployment in Chinese cities," China Economic Review, Elsevier, vol. 21(4), pages 508-520, December.
  5. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.

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