Do Industries Agglomerate by Chance? -An Empirical Study of the Causes of the Agglomeration Patterns in the Japanese Manufacturing Industry

No.107
May 2001
Research Fellow Shinya Kinukawa

1. The perception that industry agglomeration occupies a large role in the formation of economic growth and industrial competitiveness is one that is found not only in the realms of regional science and urban economics. Increasingly, this awareness is gaining acceptance amongst a wide audience, from scholars of industrial organization theory and international economics to policymakers and businessmen.
2. This report analyzes change in the patterns of industry agglomerations in Japan and their causes, and considers what policies are necessary for creating competitive industry agglomerations. To measure the levels of industry agglomeration, this report employs an index based on an economic model, which is designed to determine whether or not certain economic factors are responsible for agglomeration.
3. Employing mid-level industrial classification data, measurements of the degree of industrial agglomeration reveal that-with the exception of a few industries-there is a tendency toward a low rate of agglomeration.
4. Furthermore, in order to evaluate the "High-Tech Industry Agglomeration Revitalization Plan" that the current cabinet is wrestling with, a detailed industrial classification is employed to measure the agglomeration rate of the various industries that are the focal point of the plan. As a result, even in industries that are cited as having a low rate of agglomeration under a mid-level classification, there in fact exist a large number of industries with high levels of agglomeration under their sub-classifications, implying the forming of many small industry agglomerations in all regions of the country.
5. In regions marked by the plan, however, the size of industry agglomeration is not always larger when compared with other industrial regions. In order for the government's "High-Tech Industry Agglomeration Revitalization Plan" plan to succeed, refinement of priority fields of technologies and regional differentiation is necessary.

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