Industrial structure in urban accounting

We develop a multisector general equilibrium model of a system of cities to examine the quantitative significance of the industrial structure in determining the spatial structure. We identify three types of wedges: the efficiency wedge, the labor wedge, and amenity, which capture the extent to which...

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Bibliographic Details
Published in:Regional science and urban economics 2021-11, Vol.91, p.103576, Article 103576
Main Authors: Oshiro, Jun, Sato, Yasuhiro
Format: Article
Language:English
Subjects:
Economics
Equilibrium
Harris-Todaro model
Industrial structure
Labor market
Labor market distortions
Spatial analysis
System of cities
Urban accounting
Urban economics
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Summary:We develop a multisector general equilibrium model of a system of cities to examine the quantitative significance of the industrial structure in determining the spatial structure. We identify three types of wedges: the efficiency wedge, the labor wedge, and amenity, which capture the extent to which the standard urban economics model fails to explain the observed characteristics empirically. We then calibrate the model to Japanese regional data and conduct counterfactual exercises to identify the significance of each wedge in each sector. We show that the labor wedge, which represents various labor market distortions, plays a primary role in determining the spatial structure and that the secondary sector is the most influential. •A quantitative model of a system of cities with multiple sectors is developed.•Variation in wedges in local labor markets explains Japanese population distribution.•Characteristics in the secondary sector is the most influential.
ISSN:0166-0462
1879-2308
DOI:10.1016/j.regsciurbeco.2020.103576