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Economic complexity of prefectures in Japan

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Document pages: 21 pages

Abstract: Every nation prioritizes the inclusive economic growth and development of allregions. However, we observe that economic activities are clustered in space,which results in a disparity in per-capita income among different regions. Acomplexity-based method was proposed by Hidalgo and Hausmann [PNAS 106,10570-10575 (2009)] to explain the large gaps in per-capita income acrosscountries. Although there have been extensive studies on countries economiccomplexity using international export data, studies on economic complexity atthe regional level are relatively less studied. Here, we study the industrialsector complexity of prefectures in Japan based on the basic information ofmore than one million firms. We aggregate the data as a bipartite network ofprefectures and industrial sectors. We decompose the bipartite network as aprefecture-prefecture network and sector-sector network, which reveals therelationships among them. Similarities among the prefectures and among thesectors are measured using a metric. From these similarity matrices, we clusterthe prefectures and sectors using the minimal spanning tree technique.Thecomputed economic complexity index from the structure of the bipartite networkshows a high correlation with macroeconomic indicators, such as per-capitagross prefectural product and prefectural income per person. We argue that thisindex reflects the present economic performance and hidden potential of theprefectures for future growth.

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