Measuring Economic Gains from New Food and Automobile Industry Clusters with Coagglomeration in the Tohoku Region

Abstract

In this chapter, we will take the concepts of Porter’s (1998, 2000) clusters and present an analysis of the feasibility of ongoing economic development in disaster regions, utilizing two new industry cluster models. The two clusters are the automobile industry, which targets the entire disaster region and where innovation comes from coagglomeration with different industries in megaregions, and the food industry, which, focusing on leveraging local resources, targets individual disaster-struck prefectures. This study applies a dynamic two-regional computable general equilibrium (D2SCGE) model, constructed in Chap. 5, assuming Scenario C (continuation of fiscal support for reconstruction on the basis of a new approach in a 5-year construction period from 2016 to 2020, following the intensive reconstruction period) as the base scenario. We constructed scenarios for each of these two clusters and evaluated the economic effects of each new industry cluster on disaster regions. A simulation analysis of scenarios for these two new clusters with positive and higher productivity in the coagglomerated industries reveals the following two effects: (i) economies of agglomeration from vertical and horizontal coagglomeration boost the real Gross regional Product (GRP) and productivity at the macro level when the two new industry clusters are formed jointly rather than separately and (ii) the clusters contribute to long-term, sustained growth in disaster region economies, thus 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 cuts, are unable to counteract economic stagnation resulting from sharp population decline in disaster regions. It also suggests that agglomeration externalities, evidenced by improved productivity in the formation of new food/automobile industry clusters, can offer sustained economic development in disaster regions.