In this dissertation, we investigate the effects of large-scale public investments on surrounding regions’
economic activities using Japanese municipality-level data. We find that those public investments could stimulate regional economic activity by enlarging the effects they receive from closely located economic agglomeration. In addition, our analyses suggest that governments can accelerate regional industrial agglomeration by public investments reducing disaster risk. However, we also find that large-scale public works could have negative side effects that shrink the agglomeration of specific industries.
In chapter 2, we investigate the relationship between municipalities’ accessibility to the nearest urban metropolitan area and rural poverty rates. We focus on the impacts of opening commuting trains on surrounding areas’ poverty and conduct a panel analysis. We find that even when we control for regional time invariant characteristics, improvements of accessibility to the nearest urban metropolitan area significantly decreased poverty rates in the areas closely located to the new commuting train. From our estimations, one-minute increases of time distance to the nearest urban metropolitan area increase rural poverty rates by approximately 0.002 percentage points and increase the annual expenditure for public assistance by approximately 1.75 million yen. In addition, we find that the effects of opening the commuting train on poverty in the surrounding areas require 6–10 years to be observed. From the result, we consider that spillover effects from economic agglomeration are effective in reducing poverty, and improving accessibility to closely located urban metropolitan areas could enlarge the magnitude and range of the effects. Transportation investments that improve accessibility to urban metropolitan areas may stimulate their own economic performance and reduce poverty.
In chapter 3, we investigate the impacts of constructing flood control dams on industrial agglomeration in downstream areas by focusing on the case of Shiga Prefecture. From the analyses, we find that the reduction in flood risk increases the number of manufacturing plants in their downstream areas. However, the effects were limited to manufacturing categories requiring large amount of physical capital. We also find that the reduction in flood risk increased manufacturing investments in physical capital but did not increase the number of their employees. From the result, we consider that manufacturing industries facing disaster risk tend to invest in human resources with greater mobility than physical capital. In addition, reduction in flood risk had effects also on commerce industry in downstream areas. The effects required more than 10 years to occur. From the result, we interpret that the positive effects on commerce industries
are caused by increases in manufacturing industries’ demand for their materials. Therefore, the effects occur only after manufacturing industries are activated. Our estimation results suggest that constructing flood control dams promotes manufacturing agglomeration in downstream areas. The magnitude becomes larger in industries requiring larger physical capital. In the long term, large-scale public investments aiming to reduce regional disaster risk could improve the regions’ economic activities even if governments do not anticipate the effects.
Chapter 4 focuses on the LBCD project, a large-scale water resource development conducted in Lake Biwa. The project consisted of constructing dams in rivers flowing into Lake Biwa, and we find that constructing dams had negative effects on the primary industries in the downstream areas thorough decreases in the amount of nutrients flowing in the rivers. In the downstream areas, agricultural productivity and fishing industries’ agglomeration decreased after the project. The effects are observed not only in Shiga Prefecture but also in the downstream areas of Lake Biwa. Those negative effects of constructing dams are not anticipated by the governments. Those effects had not been considered in the contexts of assessments of public developments. National or regional governments compensate for the losses of downstream primary industries caused by those water resource developments.
From our studies, we consider that large-scale public investments can stimulate regional economic activities through enlarging regional economic agglomeration or spillover effects from the urban metropolitan areas. However, public investments may shrink regional economic agglomeration through unanticipated channels. To find those concealed losses and achieve more efficient investments, we need more empirical studies focusing on the impacts of public investments on economic agglomeration.
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