Regional economic potentials and wages of manufacturing industries

Atsushi Watanabe, Ryohei Nakamura

Research output: Contribution to journalArticle

Abstract

In recent years empirical studies on the New Economic Geography (NEG) model have been extensively implemented, while the NEG model has mainly advanced in theoretical extension. A typical example of the empirical application of NEG is to estimate regional market potentials. Redding and Venables proposed two types of regional market potential in an NEG model. One being "Market Access" derived from market demand and the other "Supply Access" derived from supply capacity. They estimated the trade equation with regional dummy variables. Using the estimated results, they measured two regional market potentials. In this study, we estimated the elasticity of substitution by industry without regional dummy variables in the trade equation. The estimation of the elasticity of substitution by industry was made possible using data of 47 prefectural inter-regional input-output tables. We found the degree of commodity differentials for industrial characteristics using the estimated results of the elasticity of substitution. For example, the food and tobacco manufacturing industries have low differentials in commodity production, but the automobile industry has a high degree of differentials. Using the estimated results of elasticity of substitution, we calculated regional market potentials by industry. The elasticity of substitution affects the regional market potentials. In other words, the degree of commodity differentials affects the regional market potentials. Finally, we analyzed the relationships between wages and regional market potentials and found that the regional market potentials substantially affect regional wage variations. Interregional transportation access improvements also have been found to affect wages through changes in regional market potentials.

Original languageEnglish
Pages (from-to)63-82
Number of pages20
JournalStudies in Regional Science
Volume46
Issue number1
DOIs
Publication statusPublished - 2016

Fingerprint

manufacturing industry
wage
manufacturing
market
industry
economics
substitution
elasticity
economic geography
commodity
supply
commodity production
automobile industry
tobacco
nicotine
food

Keywords

  • Local agglomeration
  • Market potentials
  • New economic geography
  • Wage differentials

ASJC Scopus subject areas

  • Environmental Science(all)
  • Social Sciences(all)

Cite this

Regional economic potentials and wages of manufacturing industries. / Watanabe, Atsushi; Nakamura, Ryohei.

In: Studies in Regional Science, Vol. 46, No. 1, 2016, p. 63-82.

Research output: Contribution to journalArticle

@article{0a3fed5a4a0142bc949544e286b71795,
title = "Regional economic potentials and wages of manufacturing industries",
abstract = "In recent years empirical studies on the New Economic Geography (NEG) model have been extensively implemented, while the NEG model has mainly advanced in theoretical extension. A typical example of the empirical application of NEG is to estimate regional market potentials. Redding and Venables proposed two types of regional market potential in an NEG model. One being {"}Market Access{"} derived from market demand and the other {"}Supply Access{"} derived from supply capacity. They estimated the trade equation with regional dummy variables. Using the estimated results, they measured two regional market potentials. In this study, we estimated the elasticity of substitution by industry without regional dummy variables in the trade equation. The estimation of the elasticity of substitution by industry was made possible using data of 47 prefectural inter-regional input-output tables. We found the degree of commodity differentials for industrial characteristics using the estimated results of the elasticity of substitution. For example, the food and tobacco manufacturing industries have low differentials in commodity production, but the automobile industry has a high degree of differentials. Using the estimated results of elasticity of substitution, we calculated regional market potentials by industry. The elasticity of substitution affects the regional market potentials. In other words, the degree of commodity differentials affects the regional market potentials. Finally, we analyzed the relationships between wages and regional market potentials and found that the regional market potentials substantially affect regional wage variations. Interregional transportation access improvements also have been found to affect wages through changes in regional market potentials.",
keywords = "Local agglomeration, Market potentials, New economic geography, Wage differentials",
author = "Atsushi Watanabe and Ryohei Nakamura",
year = "2016",
doi = "10.2457/srs.46.63",
language = "English",
volume = "46",
pages = "63--82",
journal = "Studies in Regional Science",
issn = "0287-6256",
publisher = "The Japan Section of the Regional Science Association International",
number = "1",

}

TY - JOUR

T1 - Regional economic potentials and wages of manufacturing industries

AU - Watanabe, Atsushi

AU - Nakamura, Ryohei

PY - 2016

Y1 - 2016

N2 - In recent years empirical studies on the New Economic Geography (NEG) model have been extensively implemented, while the NEG model has mainly advanced in theoretical extension. A typical example of the empirical application of NEG is to estimate regional market potentials. Redding and Venables proposed two types of regional market potential in an NEG model. One being "Market Access" derived from market demand and the other "Supply Access" derived from supply capacity. They estimated the trade equation with regional dummy variables. Using the estimated results, they measured two regional market potentials. In this study, we estimated the elasticity of substitution by industry without regional dummy variables in the trade equation. The estimation of the elasticity of substitution by industry was made possible using data of 47 prefectural inter-regional input-output tables. We found the degree of commodity differentials for industrial characteristics using the estimated results of the elasticity of substitution. For example, the food and tobacco manufacturing industries have low differentials in commodity production, but the automobile industry has a high degree of differentials. Using the estimated results of elasticity of substitution, we calculated regional market potentials by industry. The elasticity of substitution affects the regional market potentials. In other words, the degree of commodity differentials affects the regional market potentials. Finally, we analyzed the relationships between wages and regional market potentials and found that the regional market potentials substantially affect regional wage variations. Interregional transportation access improvements also have been found to affect wages through changes in regional market potentials.

AB - In recent years empirical studies on the New Economic Geography (NEG) model have been extensively implemented, while the NEG model has mainly advanced in theoretical extension. A typical example of the empirical application of NEG is to estimate regional market potentials. Redding and Venables proposed two types of regional market potential in an NEG model. One being "Market Access" derived from market demand and the other "Supply Access" derived from supply capacity. They estimated the trade equation with regional dummy variables. Using the estimated results, they measured two regional market potentials. In this study, we estimated the elasticity of substitution by industry without regional dummy variables in the trade equation. The estimation of the elasticity of substitution by industry was made possible using data of 47 prefectural inter-regional input-output tables. We found the degree of commodity differentials for industrial characteristics using the estimated results of the elasticity of substitution. For example, the food and tobacco manufacturing industries have low differentials in commodity production, but the automobile industry has a high degree of differentials. Using the estimated results of elasticity of substitution, we calculated regional market potentials by industry. The elasticity of substitution affects the regional market potentials. In other words, the degree of commodity differentials affects the regional market potentials. Finally, we analyzed the relationships between wages and regional market potentials and found that the regional market potentials substantially affect regional wage variations. Interregional transportation access improvements also have been found to affect wages through changes in regional market potentials.

KW - Local agglomeration

KW - Market potentials

KW - New economic geography

KW - Wage differentials

UR - http://www.scopus.com/inward/record.url?scp=84988422531&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84988422531&partnerID=8YFLogxK

U2 - 10.2457/srs.46.63

DO - 10.2457/srs.46.63

M3 - Article

AN - SCOPUS:84988422531

VL - 46

SP - 63

EP - 82

JO - Studies in Regional Science

JF - Studies in Regional Science

SN - 0287-6256

IS - 1

ER -