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Industrial Specialization or Diversity? How High-Speed Rail Fosters Japan’s Regional Agglomeration Economy

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Document pages: 17 pages

Abstract: We investigate the relationship between high-speed rail (HSR) and agglomeration economy in the scope of specialization and diversity to answer two questions: first, to determine whether specialization or diversity promotes economic productivity, and second, to determine whether HSR promotes specialization or diversity. Specialization diversity agglomeration index based on the coefficient of variation of localization agglomeration is proposed to measure city’s specialization and diversity. Our analysis utilizes data of agglomeration across 17 industrial sectors in Japanese municipality level. Depending on the definition of agglomeration diversity, one of the results reveals a U-curve relationship as productivity is plotted in Y-axis and specialization agglomeration in X-axis. In other words, both specialization and diversity benefit to economic productivity. Yet, a city which is not specialized and not with a high level of industrial diversity will be the loser in the economy. For the second question, based on the assumption of a quadratic function, HSR could affect city’s specialization and diversity based on the distance to HSR service. From the results, HSR promotes industrial diversity in the city with HSR service, and the city located around 540 km away from HSR service, while HSR promotes city’s specialization in the city located around 270 km away from HSR service.

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