Industrial Relocation Policy and Heterogeneous Plants Sorted by Productivity: Evidence from Japan

Author Name OKUBO Toshihiro  (Kobe University) /TOMIURA Eiichi  (Faculty Fellow, RIETI)
Creation Date/NO. April 2010 10-E-016
Research Project Study on Offshore Outsourcing by Japanese Firms
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In an economic geography model with firm heterogeneity, Baldwin and Okubo (2006) show that regional policies for promoting periphery development attract low-productivity firms and adversely affect the productivity gap within a country. This paper empirically examines their theoretical prediction by using plant-level data during active relocation policies in Japan. Our estimation results from plant-level regressions and propensity-score matching that are generally consistent with the theory. Compared to other regions, those targeted by policies, especially by industrial relocation subsidy programs, tend to have low-productivity plants.