Agglomeration and the Price of Land: Evidence from the Prefectures

52 Pages Posted: 16 May 2000 Last revised: 28 Jul 2010

See all articles by Robert Dekle

Robert Dekle

University of Southern California - Department of Economics

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 1994

Abstract

We use Japanese prefectural wage and land price data to estimate the magnitude of agglomeration effects in manufacturing and finance. We also examine the range of agglomeration effects by estimating the extent to which they diminish with distance, using a specification that encompasses the polar cases of purely local agglomeration economies, on the one hand, and national increasing returns to scale, on the other. We find that agglomeration effects are slightly stronger in financial services than in manufacturing, and that they diminish substantially with distance in either sector. Our estimates indicate that agglomeration effects can explain about 5.6 per cent of the growth in Japanese output per worker in manufacturing and about 8.9 per cent of the growth in output per worker in financial services during 1976-1988. Our estimates imply that, while the average elasticity of productivity with respect to agglomeration is between 10 and 15 per cent, agglomeration economies in the largest prefectures are nearly exhausted.

Suggested Citation

Dekle, Robert and Eaton, Jonathan, Agglomeration and the Price of Land: Evidence from the Prefectures (June 1994). NBER Working Paper No. w4781. Available at SSRN: https://ssrn.com/abstract=227960

Robert Dekle

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
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213-740-8335 (Phone)

Jonathan Eaton (Contact Author)

Leonard N. Stern School of Business - Department of Economics ( email )

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212-998-8951 (Phone)
212-995-3932 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/eatonj/

National Bureau of Economic Research (NBER)

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