In order to analyze determinants of regional income disparities we must focus on the economic interdependence between regions as well as technological spillovers and factor endowment in the regions. For instance, we want to know what changes have occurred in the division of work among Japanese regions in recent years and whether they have increased or decreased regional income disparities. When we want to study these interdependences and their changes, the need for inter-regional input-output (IO) table is evident. This paper explains the construction of inter-prefectural IO table for 2005 and main results.
In Japan, each prefecture regularly releases prefectural-level IO tables. However, prefectural IO tables is not necessarily constructed on consistent industrial classification and activity definitions. Therefore, the first step is to harmonize these differences in classifications and definitions. The most important harmonization undertaken is the treatment of activities of headquarters for companies that operate trans-regionally with offices in deferent prefectures. After harmonizing prefectural IO table, an inter-prefectural IO table is constructed by estimating intermediate sectoral inputs from different prefectures.