Events

Professor Atsushi Yamagishi
Associate Professor
Institute of Economic Research
Hitotsubashi University

We examine how the external consumption demand and employment shape the pattern of urbanization and the economic structure. We focus on the unique case of Okinawa in Japan, where many US military bases were constructed for strategic reasons and created substantial consumption demand and employment of local workers. Using newly digitized data, we first document rapid urbanization near the bases, driven by service sector expansion rather than manufacturing. We then develop a new quantitative spatial model and calibrate it to the Okinawan economy in 1970. Our counterfactual analysis highlights that the US-base sourced consumption and employment were crucial to urbanization without industrialization, which entailed large positive impacts on the aggregate income and welfare.