Impacts of industry clusters with innovation on the regional economy in Japanese depopulating society after the Great East Japan Earthquake

Abstract

In this paper, we will take the concepts of Porter’s (On competition. Harvard Business School Press, Cambridge, 1998, Econ Dev Q 14(1):15–34, 2000) clusters and present an analysis of the feasibility of economic development in Japanese disaster regions under rapid population decline, utilizing two new industry clusters with innovation. The two clusters used are the automobile industry cluster, which targets the entire disaster region and whereby innovation comes from coagglomeration with different industries in mega-regions, and the food industry cluster, which target individual disaster-struck prefectures, focusing on their leveraging of local resources. This paper applies the dynamic two-regional computable general equilibrium model. We construct scenarios for each of these two clusters, and evaluate each new industry cluster model’s economic effects on disaster regions. A simulation analysis for scenarios of these two new clusters with positive and higher productivity in the coagglomerated industries reveals the following two effects: (1) that economies of agglomeration attained from vertical and horizontal coagglomeration have the effect of boosting real GRP and productivity on the macro level when the two new industry clusters are formed jointly rather than individually, and (2) that they contribute to long-term sustained growth in disaster region economies, reducing the gap between their growth and that of other regional economies. This can be interpreted to mean that the usual policies adopted, such as subsidies and corporate tax cut policies, are unable to counteract economic stagnation that comes as a result of a sharp decline for population numbers in disaster regions; it offers a conclusion that the agglomeration externalities seen from improved productivity in the formation of the new food/automobile industry clusters can offer sustained economic development in disaster regions.