Establishment of Sustainable Local Economic Systems - Analysis of economic structure: Kurashiki city case study

Author Name NAKAMURA Ryohei  (Faculty Fellow, RIETI) /MORITA Manabu  (Value Management Institute, Inc.)
Creation Date/NO. October 2008 08-P-011
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This research analyzes local economic structures in an effort to establish a sustainable local economic system using the city of Kurashiki as a case study. The analysis of local economic structures was announced by the Ministry of Economy, Trade and Industry (METI) in 2004, under the "Guideline to the Analysis of Local Economic Structures" (2004 edition). The analytical procedures described in the guideline are as follows: (1)identify a region to be analyzed; (2) understand changes and trends in basic local economic indicators; and (3) as a more advanced analysis, compare an economic structure and the status of income and employment with other regions in similar circumstances; specifically, identify industries (trading and specialized industries) that generate income (money), industries (integrated industries) that create employment, and industries (key industries) that generate added value; (4) understand the flow of goods and services (including the amount and frequency of outflows and inflows) and, based on this understanding, examine the circulation of money generated within the regions and the extent of outflows of money to regions outside; and (5) examine the stability and growth of the local industries in terms of their productivity and profitability.

Based on the above analysis from (2) through (5), a prescription for the local economy is prepared. From the above analysis, the circulation of the local economy described in (4) refers to an understanding of the linking structure among industries, and is the most important factor in analyzing the structure of the local economy. However, understanding this specific feature of the local economy using available statistics is generally difficult, so further appropriate research is needed. This means developing an industrial link table (in particular, of a non-competitive import type) of so-called small regions based on the survey method. This analysis will offer insight not only into transactions among industries in the region, but also into the relationship of local regions in terms of transactions among industries. The link table of the local economy has traditionally been used to examine the effect of economic activities. This research, meanwhile, focuses on what kind of local industrial link can be created to develop an independent local economy. Based on this focus, in addition to an analysis of the impact of existing investments (the impact of bringing in construction work and a range of industries) to bolster industrial activity, this research examines what kind of link structure would be more effective. It does this by running simulations of the impact of changes in forward and reverse link effects by industry and changes in the industrial structure (for example, by changing import coefficients). Going beyond research, this project discussion paper also aims to set out the procedures of the policy analysis using examples of the analysis of the local economic structure.