Regional Cycle and Income Disparity

Abstract

The purpose of this paper is to study the behaviour of regional income-especially, the movement of regional inequality and the stability of regional development-in Japan. With regard to regional income, we use two kinds of annual data on per capita regional income: per capita prefectural income and personal income, for the 1955-76 period.The behaviour of regional income can be analysed in terms of income differential and growth rate differential. The framework formulated by Leo H. Klaassen in “Regional Dynamics”, classifies areas into four stages depending on their income level and growth rate. A region at any time belongs to one of the following stages; (1) presperous area (both income level and growth rate are above the national average), (2) stagnant area (income level is above the national average but growth rate is below it), (3) development area (both income level and growth rate are below the national average), (4) potentially prosperous area (income level is below the national average but growth rate is above it).It is hypothesized by Klaassen that regions would move sequentially from one stage to another in the direction such as (1)→(2)→(3)→(4)→(1).The cyclical behaviours of regional income are as follows. The move from (1) to (2) occurred in the urban and highincome prefectures. A large number of prefectures, which are mostly in the peripheral regions, moved from (3) to (4), becoming from development areas to potentially prosperous ones, and many of them experienced the reverse move like (3)→(4)→(3). The prefectures near the centre (both national averages) shifted many stages in the expected direction. About 70 percent of all moves are clockwise and support the hypothesis. In this sense the movements were stable. So, we may conclude that, in general, regional development before the oil crisis was quite stable and the equalization of regional income was dominant.