The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian Development Bank Institute 1

(ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included
in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

Jetpan Wetwitoo
 2
HSR to Econ. Development through Agglomeration
One of the goals from HSR investment is to boost
economic development.
• Three mechanisms link transportation to productivity (TRB, 2014)
• Efficiency (Cost Reduction) Effects
• Technology Adoption Effects (from better reliability)
• Agglomeration Benefits
• Agglomeration is highlighted in this study because
• Agglomeration impact from HSR is expected to be larger than other
transportation modes.
• In HS2 project in UK, it was estimated that agglomeration benefit is
around 44% of direct (cost reduction) benefit (Kernohan & Rognlien,
2011)

Hokkaido Shinkansen
Source: Asahi Shimbun
 3
What is Agglomeration Economy?
Agglomeration economy = the benefits emerged when workers work near one
another as a cluster.
• New transportation shortens travel time
• Faster travel also means locate near one another
• Agglomeration economy can be enhanced by transportation
How better transportation
leads to higher productivity Transportation Improvement
through agglomeration?

Agglomeration around
transportation facilities

SHARING MATCHING LEARNING

Firm has better access to Worker can travel further Easier to organize/attend
better quality of goods for better jobs innovative activities

Higher Productivity
 4
How HSR enhance Agglomeration Economy?
Two major HSR impacts Mechanism
HSR Impact Agglomeration Impact Migration Impact
Better accessibility Work closer to
Impact from to other worker other workers
Impact from
NEW ECONOMIC
LESS TRAVEL TIME More Scheduled/formal More Daily/Informal
ACTIVITY
Meetings and Seminars Meetings and Seminars
Agglomeration Impact Migration Impact

“Agglomeration impact” = “Migration impact” = More communication

impact emerged when impact emerged when between workers
more workers are easily more workers work close
accessible to other to each other Higher productivity
workers in other cities
Agglomeration Impact Migration Impact
Popx=100k Popy=100k
Before Travel time = 3hrs Travel time = 3hrs PopA=500k
X A Y X A Y
HSR
Popx=50k PopA=600k Popy=50k
After Travel time = 1hr Travel time = 1hr
HSR
X A Y X A Y
 5
Analysis 1: Agglomeration Impact Analysis
Question?
Defining Agglomeration Economy
To what extent agglomeration impact can be
expected from HSR Project in Japan? Employment in j

Methodology: Regression analysis of production function with

HSR related variables Travel time between i and j,
• Panel analysis: prefecture level; 1981,1986,1991,1996,2001,2006 where HSR is the main mode
of transportation
Model specification
Example EA=200 workers
TA=5 min
a
TAB=30 min TAC=20 min

b c
EB=500 workers EC=300 workers
Dt is dummy=1 data if it is observed in year t
 6
Fact and Estimation Result
Prefectural Productivity
Estimation result
Coef. SE t-stat. sig
Constant. 1.298 0.62 2.1 *
Agglo1981 0.097 0.02 5.6 ***
Agglo1986 0.090 0.02 5.2 ***
Agglo1991 0.085 0.02 5.0 ***
1981 1991 Agglo1996 0.081 0.02 4.6 ***
Agglo2001 0.078 0.02 4.5 ***
Agglo2006 0.078 0.02 4.5 ***
Capital (K) 0.288 0.02 11.6 ***
Investment (I) 0.146 0.02 6.4 ***
Wage (W) 0.456 0.04 11.4 ***
FIRE share (fire) -0.237 0.14 -1.7 .
No. of Transfer (tf) -0.017 0.00 -4.2 ***
Adjusted R2 0.944
2001 2006 F-stat 412.9
N 282
• Pref. with HSR station  More productivity
• Agglomeration impact from HSR  positive and
• Gap between with/without HSR station is decreasing
significant
• Time lag between: Starting of HSR  productivity
• Benefit is decreasing through time
benefit is observed = more than 10 years
 7
Scenario Analysis and General Implication
Scenario Analysis Why the outer-edge of metropolitan areas (MAs)
• Compare productivity between pref. with have more significant gain in productivity from HSR?
and without HSR station based on model
showed in previous slide Reason Edge
of MA
CBD MA Outer edge Beyond

•Demand
High High potential Low potential
to CBD
•Urban Available Not available Not available
Transp.

HSR could lead to larger impacts in outer-edge area

than beyond area or MA.

General Implication
Productivity gain is significant at the The areas with higher impacts from HSR depend on the
outer-edge of metro. area (regions on this circle) availability of urban transportation service in MA.

Agglomeration impact to productivity is significant, could be uplift to 4%

 8
Analysis 2: Industrial Agglomeration Analysis
Question?
Two types of agglomeration
What industry benefit from better
(A1) Urbanization Agglomeration
agglomeration?
Methodology: Regression analysis of production Passenger
travel time
function with agglomeration variable by industry (A2) Localization Agglomeration
• Panel analysis: prefecture level; 1981,1986,1991,1996,2001,2006
Model specification
Semi-Parametric Model Example Assuming only two
Agglo. in industry n industries n and m in
Agglo. in industry m the prefecture i
(A1) (A2)

An+Am An
11 Industries Elasticity GRP
• Agriculture • Finance & Insurance in industry n
• Mining • Real estate
• Manufacturing
• Construction
• Transportation &
Communication
GRPn GRPn
• Elec., Gas and Water • Other Services
• Retail & Wholesales • Government GRP in industry n
 9
Estimation Result and General Implication
Example of full estimation of Urbanization Agglomeration (A1) Sum Localization Agglomeration (A2) Sum
Real Estate sector by A1 (N=282) Agriculture insignificance -0.296 *** ㊀ insignificance -0.470 *** ㊀
Control? Pref. control Time control Mining 1.267 *** insignificance ㊉ insignificance insignificance N/A
Intercept Manufacturing insignificance 0.095 * ㊉ -0.274 *** 0.109 * ㊀
lnA1 -0.417** 0.292*** Construction insignificance -0.101 * ㊀ 0.532 *** -0.106 * ㊉
lnL 0.636*** 0.090 Elec,Gas&Water insignificance insignificance N/A -1.324 *** insignificance ㊀
lnK -12.914* -2.013 Retail insignificance insignificance N/A 0.203 *** insignificance ㊉
lnI 21.755** -1.502 Finance&Insur 0.935 *** insignificance ㊉ 0.750 *** insignificance ㊉
lnK2 2.464* -5.008. Real Estate -0.417 ** 0.292 *** ㊉ insignificance 0.244 *** ㊉
lnI2 1.525 -6.131* Transport&Comm insignificance insignificance N/A 0.520 *** insignificance ㊉
lnK*lnI -4.396* 11.251* Service insignificance insignificance N/A -0.478 *** insignificance ㊀
lnK3 -0.227. 0.694.
Gov. Service -0.195 *** insignificance ㊀ -0.207 ** insignificance ㊀
lnI3 0.212 -0.686
Model Prefecture control Time control Prefecture control Time control
lnK2*lnI 0.652 -2.097.
lnK*lnI2 -0.632 2.088. Sig.codes: 0<***<0.001<**<0.01<*<0.05; ㊉ = positive significant; ㊀ = negative significant
F-stat 231.92 459.299
Adj. R2 0.730 0.893
General Implication
• For development in urban area, A1 should be considered
• For development in new area/special economic zone, A2 should be emphasized

Finance, Insurance and Real Estate should be promoted with HSR

 10
Agglomeration by Road Travel Time
Urbanization Agglomeration (A1) Sum Localization Agglomeration (A2) Sum
Road + Ferry Agriculture insignificance -0.182 *** ㊀ -0.430 ** -0.296 *** ㊀
travel time Mining 1.062 *** insignificance ㊉ 0.273 * insignificance N/A
Example of full estimation of Manufacturing 0.234 * 0.108 *** ㊉ -0.177 * 0.085 *** ㊉
manufacturing sector by A1 (N=282) Construction insignificance -0.068 *** ㊀ 0.351 *** -0.074 ** N/A
Control? Pref. control Time control Elec,Gas&Water insignificance insignificance N/A -0.784 *** insignificance ㊀
Intercept Retail&Wholesale insignificance 0.081 *** ㊉ 0.166 *** 0.079 *** ㊉
lnA1 0.234* 0.108*** Finance&Insurance 0.621 *** insignificance ㊉ 0.748 *** insignificance ㊉
lnL 0.305** 0.538*** Real Estate -0.280 * 0.215 *** ㊉ insignificance 0.166 *** ㊉
lnK 22.383 -2.865 Transport&Comm. 0.227 * 0.030 * ㊉ 0.444 *** 0.030 * ㊉
lnI -10.471 1.554 Service insignificance insignificance N/A -0.365 *** insignificance ㊀
lnK2 -2.464 -2.184 Government -0.115 ** insignificance N/A -0.107 * insignificance N/A
2
lnI -1.706 -2.861 Model Prefecture Control Time Control Prefecture Control Time Control
lnK*lnI 3.788 5.087
Sig.codes: 0<***<0.001<**<0.01<*<0.05; ㊉ = positive significant; ㊀ = negative significant
lnK3 0.330* 0.415**
lnI3 -0.353* -0.442** Result
lnK2*lnI -0.996* -1.282**
lnK*lnI2 1.023* 1.309** • In additional to previous slide, agglomeration by freight transportation also
Adj. R2 0.896 0.987 found in manufacturing, retail & wholesale, and transportation & communication

Agglomeration benefit found in HSR could be less diverse than road

 11
Analysis 3: Migration Impact Analysis
Question? Proposed Causal Relationship
Does HSR affect migration? Lower
New transport cost
Methodology: Regression analysis based on the HSR Attract new
firms
total migration per capita service Better
accessibility
• Panel analysis: prefecture level, 1997-2010

Model specification
Employment Population
Growth Growth

Notation:
M = 250
Green Blue
Town City
Blue M = 200
Green
City Town
 12
Estimation Result
Estimation result
Coef. Std.Error t Stat P-value
Const 2.71E-04 7.89E-06 34.324 0.000 ***
GRP/Pi 1.67E-05 1.31E-06 12.694 0.000 ***
GRP/Pj -7.93E-05 1.30E-06 -60.957 0.000 ***
Ui -7.25E-06 9.51E-07 -7.618 0.000 ***
Uj 4.11E-06 9.48E-07 4.332 0.000 ***
DIDi 1.14E-06 6.30E-08 18.120 0.000 ***
DIDj -2.06E-06 6.11E-08 -33.646 0.000 ***
HSRi -1.43E-13 4.42E-13 -0.323 0.746
HSRj -2.47E-12 4.39E-13 -5.628 0.000 ***
dij -1.23E-08 2.36E-09 -5.229 0.000 ***
Adj.R2 0.261
N 30,268
People will move to region with People will move out of region with
• High GDP/capita • Low GDP/capita
• High urbanization • Low urbanization
• Low unemployment rate • High unemployment rate
• Located nearby • No HSR service
HSR prevents people to move out, but may not attract people to move in

HSR encourages migration from small cities

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Shrinking in Agglomeration Economy
• Positive impact to Agglomeration • Negative impact to Agglomeration
Economy Economy
• Transportation, Communication • Aging society
• Urbanization

HSR Impact

Impact from
Impact from
NEW ECONOMIC
LESS TRAVEL TIME
ACTIVITY

Agglomeration Impact Migration Impact

Long term impact should be carefully considered

 14
Conclusion
• Findings and suggestions
• There are significant impacts from HSR to agglomeration economy
• Depends on industry, the effect could be positive, negative or no effect from agglomeration
• Positive impact industry should be promoted along HSR corridor
• Finance and Insurance
• Real Estate
• Some other service sectors
• HSR promotes more urbanization
• Prepare a measurement to further population growth in urban area
• Prepare for decreasing population growth in rural area along HSR corridor

Thank you for your attention