Professor, Division of Spatial Socio-Economic Research

Further information is available at http://home.csis.u-tokyo.ac.jp/~takaaki-t/

The research on the provision of public goods by local governments

We often observe that governments compete with each other in the provision of local public goods, in particular, infrastructure, which are the public goods whose consumption is limited to a particular area. It is not rare, for instance, that local governments behave strategically to win the construction of national highway and high speed train systems in their own regions. Taking another example, the national governments planning to construct a high capacity international airport compete with each other so as to make their own airport a hub in the global aviation network. In these cases, the governments consider whether their construction of such infrastructure provokes their neighboring competitors’ same behavior, and, if it is the case, how the price competition will end up. What is important here is that the behaviors of governments are strategic, which is far from the world characterized by the perfect competition.
The purpose of this research is to reveal the nature of the competition among the governments providing local public goods, through theoretical and empirical analyses. Special attention is paid on the transport costs and the economies of scale. These two factors play an important role in the so-called ‘new economic geography’, which has been attracting the attentions of many researchers since 1990’s. Thus, in this research, the results of the new economic geography are taken into account.

The research on the mutual relationship between economic geography and transport costs

Types of transport technologies adopted in each economy differ among cities, regions and countries. In the United States, for example, a number of passengers use airplane to move between cities while most of the cargo shipment is made by trucks. In Japan and Europe, railways take an important part in transportation. Moreover, what transport technology is used affects the transport costs, which, in turn, gives impacts on the economic performance of cities, regions and countries. That is, the transport technology affects the behaviors of consumers and producers through the price mechanism in a shorter run, and, furthermore, it causes the changes in their locations in a longer run. In the States, for instance, the development of the interstate highway system after the World War II resulted in the plummet of the transport costs between metropolitan areas, which induced the agglomeration of economic activities into a small number of big metropolitan areas. This enabled them to exploit the benefit of economies of scale and, consequently, to enjoy rapid economic growth.
What is important here is that in most countries, which transport technology is to be adopted is determined by the voluntary decision makings by individual economic agents including firms in a transport sector. Therefore, the result may be socially suboptimal, in particular when there exist some form of externalities or monopolistic market structure. If the market mechanism does not work well, then, some policy intervention becomes necessary. In order to enhance the efficiency of an economy, what transport technology should the governments of cities, regions and countries promote to be adopted and by what policies? This research attempts to answer such questions.

The research on the trade-off between the transport sector and the other production activities

The resource endowed in an economy needs to be allocated between the transportation and the production of goods and services. If the production expands, the demand for the transportation increases, and, as a result, the resource to be allocated to the transport sector also rises. This works against the expansion of production. Thus, there is a trade-off between the transportation and production.
This research examines this trade-off relationship and studies the mechanism that determines the resource allocation between the transportation and production. Moreover, it explores the effects of the industry structure, namely, the relative size of transport sector compared to production sectors, upon the resource allocation and a welfare level of an economy.