When making a location decision, a firm considers only its own trading costs and ignores trading costs paid by trading partner firms. The exclusion of the latter is the source of locational externalities. We examine this locational externality in the Tokyo metropolitan area, using the actual...

In this paper, geographical spillover potential is modeled and empirically examined using factory-level data from Japans Census of Manufactures. First, the efficiency of each factory is estimated using a non-parametric data envelopment analysis (DEA) model for each industry. Second, the...