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Urbanization without Industrialization : Evidence from US Bases in Okinawa

Author

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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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    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/85868/DP767.pdf
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    More about this item

    Keywords

    Urbanization; Service sector; Quantitative spatial model; Military bases; Okinawa;
    All these keywords.

    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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