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

29 Pages Posted: 4 Oct 2001 Last revised: 12 Oct 2022

See all articles by Donald R. Davis

Donald R. Davis

National Bureau of Economic Research (NBER); Columbia University

David E. Weinstein

Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2001

Abstract

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.

Suggested Citation

Davis, Donald R. and Weinstein, David E., Market Size, Linkages, and Productivity: A Study of Japanese Regions (October 2001). NBER Working Paper No. w8518, Available at SSRN: https://ssrn.com/abstract=286190

Donald R. Davis (Contact Author)

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David E. Weinstein

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