|Author Name||OSHIRO Jun (Okinawa University) / SATO Yasuhiro (University of Tokyo)|
|Creation Date/NO.||December 2016 16-E-105|
|Research Project||Spatial Economic Analysis on Trade and Labor Market Interactions in the System of Cities|
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We develop a multisector general equilibrium model of a system of cities to study the quantitative significance of industrial structure in determining spatial structure. We first identify three types of wedges that capture the extent to which the standard urban economic model fails to explain empirically: efficiency and labor wedges, and amenity. We then calibrate the model to Japanese regional data and run counterfactual exercises to identify the significance of each wedge in each sector. Our analysis shows that (i) the labor wedge plays the primary role in determining the spatial structure, and (ii) the secondary sector is the most influential.