Japan’s Prefectural-level KLEMS: Productivity Comparison and Service Price Differences

Abstract

We compile a prefectural-level KLEMS database for Japan and conduct productivity comparisons for Japanese 47 prefectures. One of the difficulties in compiling regional KLEMS database is how to handle variation in service prices across regions. To cope with this problem, we estimated cross-regional pricelevel differences in each industry in the service sector based on prefectural-level item-wise data of service prices. For estimation, we applied the Country-ProductDummy (CPD) method, a method used to estimate absolute purchasing power parities among countries. As a result of re-calculation, the standard deviation of cross-regional TFP difference indices in 2009 decreased by around 13 per cent. In addition, by using the derived cross-regional price difference indices, we confirmed that the Balassa-Samuelson effect, which holds among international economies, also holds among regional economies in Japan.

Keywords

• klems database
• japan
• economic productivity