Factors of Interregional Income Inequality in Postwar Japan: Theil Decomposition and Gap Accounting Analyses

Abstract

This study empirically identifies some factors of interregional income inequality in postwar Japan during the period 1955–2005 using a decomposition analysis with a Theil L index and a gap accounting analysis. One major empirical finding was that interregional inequality in per capita GDP during the period 1955–2005 showed a double peaked M‐shaped curve, which was predominantly attributed to interregional inequality in labor productivity. The sectoral decomposition analysis revealed that the factors that caused fluctuations in interregional inequality in labor productivity differed from year to year. The fluctuations during the period 1960–1980 were caused by an intersectoral equilibrating process between the tertiary sector and other sectors, whereas that the fluctuations that occurred in the late 1980s and early 1990s resulted from interregional disequilibrating and equilibrating processes within the tertiary sector.

Trends in the regional allocation of public investment in the post-bubble Japanese economy

“…Employing the coefficient ratio of private capital to employment, the distribution share of employment is plausibly about 61 %, as often observed in previous studies, such as Yamano and Ohkawara (2000) and Kataoka (2008). Moran's I (Table 1) shows lower quinquennial values, although we cannot reject the null hypothesis of no spatial autocorrelation between the error term in Model 3 and the spatial weight matrix for most sample years.…”

“…The reverse is true for prefectures that have the lowest coefficient values, which are located far from this region, namely Kochi (0.090), Tottori (0.090), Shimane (0.091), Miyazaki (0.095), and Saga (0.096). However, the presented estimates have lower coefficient values of public capital than those of Yamano and Ohkawara (2000) and Kataoka (2008), partially because the data used herein cover the prolonged recession period and because the spillover effects variable is included in our model.…”

“…The data employed in this study consist of annual observations of gross regional domestic product (GRDP) and the factor inputs (labor, private and public capital, and public investment) from 1990 to 2005 for Japan's 47 contiguous prefectures. All data are sourced from Kataoka (2008) and all monetary values are deflated by 1990 constant prices.…”

Geography of Inequality in Asia

“…In East Asia, Japan's interregional inequality in per capita GDP during the 1955–2005 period shows a M‐shaped trajectory (Kataoka ; Saito ). Yun found that inequality within South Korea reached unprecedented levels since the early 1980s, with rising gaps in income, consumption, and education between the rich and the poor (2009).…”

“…Among East Asian countries, public investment is crucial to the regional inequality of labor productivity in Japan (Kataoka ). Kim and colleagues found that income inequality in South Korea was positively correlated to the distribution of decentralization instruments, such as educational services, employment, infrastructure facilities, and information network access (2003).…”