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Urbanization without Industrialization : Evidence from US Bases in Okinawa

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  • AIBA, Ikuto
  • YAMAGHISHI, Atsushi

Abstract

We examine how the inflow of external income shapes the pattern of urbanization and the economic structure. We focus on the unique case of Okinawa in Japan, where many US military bases were constructed for strategic reasons and the income inflow from them accounted for up to 40% of the aggregate income. Using newly digitized data, we first document rapid urbanization near the bases, driven by service sector expansion rather than manufacturing. We then develop a new quantitative spatial model and calibrate it to the Okinawan economy in 1970. Our counterfactual analysis highlights that the US-base related income was crucial to urbanization without industrialization. Contrary to Dutch disease concerns, we find that such urbanization without industrialization significantly increased aggregate income and welfare.

Suggested Citation

  • AIBA, Ikuto & YAMAGHISHI, Atsushi, 2025. "Urbanization without Industrialization : Evidence from US Bases in Okinawa," Discussion Paper Series 767, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hituec:767
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    References listed on IDEAS

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    1. Gabriel M. Ahlfeldt & Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2015. "The Economics of Density: Evidence From the Berlin Wall," Econometrica, Econometric Society, vol. 83, pages 2127-2189, November.
    2. Yuhei Miyauchi & Kentaro Nakajima & Stephen J Redding, 2025. "The Economics of Spatial Mobility: Theory and Evidence Using Smartphone Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 140(4), pages 2507-2570.
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    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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