Regional Policy and the Productive Efficiency of Japanese Industries

Otsuka A. and Goto M. Regional policy and the productive efficiency of Japanese industries, Regional Studies. This paper examines the impacts of agglomeration economies and fiscal transfer on productive efficiency in Japanese regional industries. Two popular methodologies are applied - stochastic frontier analysis (SFA) and data envelopment analysis (DEA) - to measure productive efficiency. The empirical findings are summarized as follows: (1) agglomeration economies improve productive efficiency; (2) fiscal transfer negatively influences productive efficiency; (3) those two findings are observed for aggregated manufacturing and non-manufacturing industries, and for sectors in manufacturing industries; and (4) the importance of agglomeration economies for regional industries has increased in recent years. Based on these results, this paper discusses effective regional policy for Japan.