Location and Productivity of Knowledge- and Information-intensive Services

Knowledge-intensive business services (KIBS), which produce skill-intensive services used as intermediate inputs, are becoming important for the economic growth and international competitiveness of advanced countries. This paper, using establishment- and firm-level micro data, analyzes the productivity of knowledge- and information-intensive services such as information services, publishers, and design services. We focus on the effect of urban density on the productivity of these services. According to the estimations, doubling the employment density of municipalities is associated with an average of around 5% higher labor productivity of the services providers, which is larger than that found in the manufacturing industry. However, the size of the economies of density is heterogeneous by individual services, suggesting that the services to be promoted by small and medium cities are different from the services for which large metropolitan cities such as Tokyo and Osaka have strong comparative advantages.

The English version of this paper is 16-E-067.