Spatial Dependence, Social Networks, and Economic Structures in Japanese Regional Labor Migration

Abstract

This study empirically analyzes the determinants of regional labor migration in Japan, where small towns are disappearing due to the shortage of labor. Using spatial models of origin–destination flows and considering network effects of labor and economic structures, we obtain results more consistent with the standard migration theory, compared to previous studies. In particular, we find that migration decisions are based on economic motivations and that high (low) unemployment rates in origin (destination) regions and low income in origin regions are important determinants of labor migration flows. Second, we report that network effects, which help reduce migration costs, play a significant role in the relocation of labor. Finally, considering different definitions of spatial weights based on distance, the volume of traded goods, and economic structures, we show that regional dependence is most appropriately defined by the similarity in economic structures. In other words, migration patterns are similar between regions that rely on analogous economic activities.