LAUSR

This paper investigates the evolution of the Japanese economy between 1980 and 2010 with regard to the population and industrial structure of cities. With the rural-to-urban transformation settling by the 1970s, Japan experienced the second stage of urbanization through the integration of nearby cities. This led, on average, to a disproportionately high population growth rate of 24% for a set of core cities during the review period. At the same time, cities experienced substantial changes to their industrial composition: on average, 35% of the manufacturing industries (at the 3-digit level) present in a city in 1980 had left by 2010, while 30% of manufacturing industries located in a city in 2010 had not been present in the same city in 1980. Remarkably, this substantial relocation of populations and industries among cities took place while a simple yet rigid relationship between the size and industrial composition of cities was preserved, characterized by the roughly constant elasticity between the number and average size of cities in which an industry was present. This paper discusses the policy implications of this persistent regularity and the possible underlying mechanisms.