Industrial agglomeration effects in Japan: Productive efficiency, market access, and public fiscal transfer

This study examines whether agglomeration economies, market access and public fiscal transfer have a positive or negative influence on the productive efficiency of Japanese regional industries. To attain the research objective, stochastic frontier analysis is applied to a Japanese data set at a prefecture level which consists of estimated spatial and industrial economic activities from 1980 to 2002. An empirical result obtained in this study indicates that both the agglomeration economies and the improvement of market access have a positive influence on the productive efficiency of Japanese manufacturing and non-manufacturing industries. In contrast, the public fiscal transfer has a negative impact on the productive efficiency. These findings indicate that many prefectures (corresponding to States in the United States), which are characterized by weak market access and/or high dependence on public fiscal transfer, are often associated with their low productive efficiency. Copyright (c) 2010 the author(s). Papers in Regional Science (c) 2010 RSAI.