The effect of deregulation of the “Act concerning the Industry Restriction” Shinya Fukui February , 2020 Discussion Paper No.2002 GRADUATE SCHOOL OF ECONOMICS KOBE UNIVERSITY ROKKO, KOBE, JAPAN The effect of deregulation of the “Act concerning the Industry Restriction”* Shinya Fukui† Research Fellow, Graduate School of Economics, Kobe University, Japan Senior Researcher, Osaka Prefectural Government, Japan February 14, 2020 Abstract Rapid population growth in large cities in Japan was seen from the mid 50’s to 60’s. This situation led to the enactment of the Act concerning the Industry Restriction (AIR) which mainly restricted manufacturing activity to avoid congestion and environmental problems in the central area of Metropolitan region and the central area of the Kinki region in Japan. Given the legislation’s concentrated impact in areas highly dependent on the manufacturing sector, deregulating the AIR thus assumes a similar effect in the Kinki. We conduct causal inference on this place-based policy to assess whether such an deregulation take effect. Our results support this view. Keywords: Restriction act; place-based policy; deregulation; program evaluation; Japan JEL classification: C23; R3; R52 * I would like to thank, Nobuaki Hamaguchi, Yoichi Matsubayashi, Naoya Sueishi, Kazufumi Yugami, Takahiro Hoshino, Junichi Yamasaki, and Tatsuya Asami for helpful comments. All remaining errors are my own responsibility. † Address: Graduate School of Economics, Kobe University, 2-1 Rokkodai-cho, Nada- ku, Kobe 657-8501, Japan. E- mail address:
[email protected] 1 Introduction Rapid population growth occurred in large cities in Japan in the mid-1950s to the 1960s. During 1955–1960, the Tokyo metropolitan area population increased from approximately 7 million to 8.3 million, whereas the population of Osaka city increased from approximately 2.6 million to 3 million (National Census).