A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Shibata, Tsubasa; Yano, Takashi; Kosaka, Hiroyuki Conference Paper The Effect of Transportation System on the Economic Growth of the Japanese Economy 1965-2000:using nine region inter-regional IO model 50th Congress of the European Regional Science Association: "Sustainable Regional Growth and Development in the Creative Knowledge Economy", 19-23 August 2010, Jönköping, Sweden Provided in Cooperation with: European Regional Science Association (ERSA) Suggested Citation: Shibata, Tsubasa; Yano, Takashi; Kosaka, Hiroyuki (2010) : The Effect of Transportation System on the Economic Growth of the Japanese Economy 1965-2000:using nine region inter-regional IO model, 50th Congress of the European Regional Science Association: "Sustainable Regional Growth and Development in the Creative Knowledge Economy", 19-23 August 2010, Jönköping, Sweden, European Regional Science Association (ERSA), Louvain-la-Neuve This Version is available at: http://hdl.handle.net/10419/119030 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. 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Hence, this paper examines historically the impact of the high-speed transport infrastructure developments on Japan’s economic growth by employing an interregional input output model for Japanese economy covering nine regions. This model is based on the IO tables from 1965 to 2000 in constant prices (nine regions and eight sectors) and determines sectoral output and sectoral price simultaneously. For this purpose, evaluation of transport development is quite important. This paper develops an index of transportation evaluation which focuses on the balance between the time-cost and the fare of any high speed transportation. Incorporating this index in the interregional input output model, the paper analyzes the effects of transport infrastructure development. As a result, this paper found positive relationship between the Japan economic growth and the development of transport system (particularly highway system), and also found problems associated with economic disparities among regions: i.e., centralization (concentration of people and goods) and decentralization occurred in core and local regions, respectively. Key words: international input output model, Japanese economy, Transportations * Research Associate of SFC Institute, Keio University, 5322 Endo, Fujisawa, Kanagawa 252-8520 Japan. ** Research Fellow,The Institute for Global Environmental Strategies (IGES), 2108-11 Kamiyamaguchi, Hayama, Kanagawa,240-0115 Japan. *** Faculty of Policy Management, Keio University, 5322 Endo, Fujisawa, Kanagawa 252-8520 Japan. 1 1. Introduction After the World War II, Japan experienced a period of restoration followed by high economic growth, and Japan became the economy with the second largest GDP in the world in 1967. We could point out that establishing better and high-speed transportation system was one of the crucial factors for the high economic growth. Since the Tokyo Olympic was held in 1964 and also Osaka Expo in 1970, the high speed transportation system has been rapidly developed (the Shinkansen line, the highway and airline). High-speed railway ‘Tokaido Shinkansen”, started in 1973, has been the main transportation line linking Japanese metropolitan regions of Tokyo, Nagoya and Osaka. The line transported 43.78 million passengers in 1965, and 55.25 million passengers increased 26% from the previous year between Osaka and Tokyo. In addition, the Japanese economy grew at a rapid pace of over 10 percent per annum during the 1960s. However, when we look into regional economy in detail, all regions have not necessary experienced high economic growth equally, and some regions have experienced the serious depression. In 1970’s, people and goods were concentrated on large economic region such as Tokyo or Osaka, and the other regions with economies of small scale declined. In 1980’s, the situation has become more serious. The infrastructure of transportation has been highly developed and the time-cost for traveling has been shortened between Tokyo and Osaka, which enabled people to go and back in a day between the two. Then, the head offices of the financial institution or large companies in Osaka are transferred to Tokyo, and people and goods were moved to Kanto regions, which became causes of excessive centralization to Tokyo. Thus, it has increased various economic disparities among regions. In order to grasp the economic effects of transportations rigorously, we need to examine historically the impact of 2 the high-speed transport infrastructure developments in the period of high economic growth by using a model. The rest of this paper is organized as follows: Section 2 explains the framework of out model; Section 3 shows the data of input output table and transportation index; Section 4 shows the model structure; Section 5 presents the results of the scenario analysis; Section 6 is conclusions. 2. Characterizing our Approach 2.1 Interregional Input Output Modeling This paper deals with interregional input output model as the basic framework, which covers the nine regions, and determines sectoral output and sectoral price simultaneously. This model has three features. Firstly, we employ the input output model which is based on the demand oriented Leontief type. Now, we have many studies which analyzing transport infrastructure development, but most of them are focusing on the supply-side. In this connection, we have not only to focus on the supply side, but also on the demand side. Secondly, as most studies used only one period IO data and build the IO model like CGE model, they do not endogenize price. In contrast, our model has sectoral output and price as endogenous variables in use of multi period IO data. Thirdly, the data sample period covers historical process of Japanese economy from 1965 up to 2000, which enables us to grasp the change of the industrial structure or the regional economic disparities. 2.2 Making the Benefit Index of Transportation We develop an index of transportation evaluation to measure its direct effect in applying the 3 concept of gravity model. Gravity model is explained to represent interaction between h-th region and k-th, in which is population of h-th region and is physical distance between the two. [J.Q.Stewart, 1948] (2.1) Although is physical distance in above model, our index of transportation extends to economic sense. Then, economic distance index is defined below; time required to travel from to traffic fare to travel from to (2.2) oppotunity labor cost traffic fare to travel from to Travel time in (2.2) is converted to opportunity labor cost in money term; travel time (one hour) is replaced by wage rate per hour. Hereafter is labeled to show time t explicitly. In order to make benefits of transportation over time in historical sense, we formulate the benefit index of transportation in the following; (2.3) The benefit transformation index in (2.3) is designed to exhibit the difference of cost between the current period and the initial one. Yet, the proportion of expenses of opportunity labor cost plus traffic fare depends on the income level in historical sense, namely, historical income should be discounted. Then, we have to modify (2.3) into (2.4) putting current income being discounted. Then the formula is below; (2.4) 4 Now the index (2.4) now makes clear the performance of transportation in current year compared to initial year 1965. If the performance of current year is improved against 1965, the index may show more than unity. Otherwise, the index will be less than unity. The index for individual transportation is made in different ways; Railway, Road, and Airline. The formulation is detailed in Section 3.2. 2.3 Incorporating these Indices into Input Output System In third place, the transportation index is incorporated into IO model. Transportation index are intended to enter IO model by three routes; a) transportation contributes to convey intermediate goods from one region to another,