Changing economic geography and vertical linkages in Japan
In Japan, the manufacturing has become geographically dispersed in the 1990s, when the import has drastically increased after the historic exchange rate appreciation. This suggests the possibility that regional input-output linkages are undermined by import penetration. The regression results indicate the decline of industrial concentrations, particularly those previously established near large output absorbers. This paper also finds that local knowledge spillovers and availability of immobile specialized labor affect regional growth. These imply that the geography matters for industrial locations rather through the supply of inputs, especially non-tradable inputs, than through the demand for tradable outputs.
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