APL (Ajiken Power Lunch)

APL (Ajiken Power Lunch) is a lunchtime workshop open to public, including IDE staffs, visiting research fellows, IDEAS students, outside researchers and graduate students. This workshop provides a platform for presentation of any work in progress where we can discuss in either English or Japanese.

Those who would attend a seminar are asked to announce yourself to receptionists on your arrival at the IDE and to obtain APL Organizers' signature on your admission card after the seminar.

June 23, 2017. (Friday) 13：00-14：30

Institute of Developing Economies, Japan External Trade Organization C22 Meeting Room 　

Identifying Neighborhood Effects among Firms: Evidence from Location Lotteries of the Tokyo Fish Market

Firms may benefit from clustering of neighboring firms of certain characteristics because such clustering allows buyers to save search cost. This idea is central to the theory of formation of market places and to many branches of agglomeration theory. A fundamental challenge in investigating such mechanisms arises from economic agents’ self-selection into locations. This makes it difficult to distinguish whether certain neighboring firms allow firms to perform better or whether such firms just cluster together. We overcome this challenge by analyzing neighborhood effects among intermediate wholesalers located in the Tokyo Tsukiji Fish Market and by exploiting a unique feature of their shop locations within the market: their locations are determined every 4-10 years by relocation lotteries. First, we confirm that their shop locations are indeed randomly distributed. Then, we find that the characteristics of the neighboring firms significantly affect firm performance. Specifically, the diversity of the types of neighboring firms as well as the fraction of neighboring firms selling similar products positively affect the performance of small-size and specialized firms. We find no effect of characteristics of close neighbors not facing the same corridor, and thus not sharing flow of buyers, which provides evidence that our results are not due to factors other than buyers, such as technology spillovers. Our results provide the first randomization-based evidence of the key theoretical mechanism of the formation of market places: agglomeration saves the search cost of the buyers.

Kensuke Teshima
(Assistant Professor, Centro de Investigación Económica, Instituto Tecnológico Autónomo de México (ITAM))

Tomohiro Machikita

English