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Market Size, Linkages, and Productivity: A Study Of Japanese Regions

  • Davis, Donald R.
  • Weinstein, David E.

One account of spatial concentration focuses on productivity advantages arising from market size. We investigate this for forty regions of Japan. Our results identify important effects of a region's own size, as well as cost linkages between producers and suppliers of inputs. Productivity links to a more general form of 'market potential' or Marshall-Arrow-Romer externalities do not appear to be robust in our data. Landlocked status does not matter for productivity of regions in Japan. The effects we identify are economically quite important, accounting for a substantial portion of cross-regional productivity differences. A simple counterfactual shows that if economic activity were spread evenly over the forty regions of Japan, aggregate output would fall by nearly twenty percent.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2003/dp2003-53.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2003/53.

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Length: 16 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unu:wpaper:dp2003-53
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  16. Justman, Moshe, 1994. "The Effect of Local Demand on Industry Location," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 742-53, November.
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