Using regional mesh statistics, this analyzes wage premiums from economies of density, distinguishing between residents and workers.
Previous research on economies of density often discussed residential and employment agglomeration together, making it difficult to derive important policy implications linking compact city policies and industrial location policies.As Japan's population decline progresses, even if attractiveness as a residential area decreases, there are still potentially attractive areas from the perspective of attracting businesses.However, when policy discussions focus excessively on residential aspects alone, the regional potential for industrial cluster revitalization may be overlooked.
To bridge this gap, this research constructed a detailed dataset integrating manufacturing establishment data with regional mesh statistics for residents and workers, and conducted statistical analysis.Regional mesh statistics are data at detailed geographic units dividing all of Japan into approximately 1km square grids, enabling more precise measurement of local agglomeration effects.
The analysis found that the main determinant of wage premiums in manufacturing is not population agglomeration but local employment agglomeration.Specifically, in areas with high employment density within the same regional mesh, significantly higher wage levels were observed compared to other areas.This effect was robustly observed even after controlling for population density in surrounding areas, demonstrating that employment agglomeration itself has an independent effect on wages.
This finding has important policy implications.Compact city policies promoted only from a residential perspective are insufficient to achieve regional revitalization; for creating high-wage, attractive employment, industrial location policies leading to local employment agglomeration play an important role.In other words, even under population decline, through strategic industrial cluster formation, it is empirically demonstrated that maintaining and improving regional economic vitality is possible.
The article concludes that in regional revitalization policies, the need to consider residential and industrial policies in an integrated manner, and particularly that forming local employment agglomerations plays an important role in regional economic revitalization.