Inter-regional networks and productive efficiency in Japan

Traditional agglomeration theories cannot explain Japan's sustained reduction of regional disparities. This study employs stochastic frontier analysis to investigate the role of inter-regional networks in improving productive efficiency using the concept of "borrowed size." Improved inter-regional networks are a driving force for strengthening local economies and converging regional disparities. Borrowed size from large city agglomeration was highly effective in local areas. The development of transportation networks has enabled local areas to catch up to large metropolitan areas. The results suggest that the development of high-speed transportation networks can help to reduce regional disparities in the Japanese economy.