Discussion Paper Series No.156

A hypothesis and an inspection
on location polarization of economic activity
and population due to economic globalization
R.WALL

T.Ishikawa

Department of Economics

Faculty of Economics

Blekinge Institute of Technology

Chuo University

April 2011

THE INSTITUTE OF ECONOMIC RESEARCH
Chuo University
Tokyo, Japan1

A hypothesis and an inspection on location polarization of economic activity andpopulation due to economic globalization
R.WALLT. Ishikawa

Department of Economics

Faculty of Economics

Blekinge Institute of Technology

Chuo University

371 79 Karlskrona

Hachioji Tokyo 192-0393

SwedenJapane-mail: rickard.wall@bth.se

e-mail: ishiy@tamacc.chuo-u.ac.jp

Abstract
In response to the globalization manufacturing firms fragment their production processes into
small blocs. The fragmented blocs are shifted to sites suitable to their characteristics inprocessing. Location changes of the factories and management facilities which govern thespatially separated factories alter not only economic composition of a city but also spatialorganization in urban system. This paper, first, proposes a theoretical hypothesis which sheds
light on the location mechanism of the globalization in altering urban systems. This hypothesis
explains from the perspective of the location theory that a few major cities of which economic
activities is adequately diversified attract more and more workers and consumers; somemiddle-sized cities from which the fragmented processes and relatively large retail storesoutflow decrease in volume of economic activity and population; and many small cities entering
the fragmented processes are characterized by a single industry. The globalization changes thelocation patterns of economic activities in regions so that it generates many urban systems thatare composed of a large and diversified city and many small and simplified cities. Secondly, thepresent paper tests the hypothesis described above by analyzing the distributions of theemployees of manufacturing, retail, finance sectors, and population of all cities in Japan and
Sweden. It is shown in the inspection that the medium scale cities lose their vitality in the
production and retail activities; due to the decay of these cities, location distributions of
production and retail activities are divided into a large city and many small cities. It is also
elucidated in this analysis that the distribution of production activity in the urban systems inexisting industrial area has a tendency to be relatively leveled, while the distribution in theurban systems in rural area is relatively converged toward a large city. The results obtained in
the inspection are not inconsistent with the essence of the theoretical hypothesis.
Key words: Globalization, Fragmentation, Market area, Urban system, Spatial organization2

ＩIntroduction
Deregulation, tariff reductions and declining transport costs have been promoting integration ofmany local markets to establish a large spatial market. The unified market covers almost theentire continent so that the term of globalization has becomes a common word. Naturally, theglobalization influences the economic composition of individual cities but also spatialorganization of urban systems in many countries: It induces a harsher price competition among
manufacturing firms and raises in turn a cost competition between strong manufacturing firms
survived the competition. To correspond with the cost competition these firms fragment theirproduction processes into small blocs to reduce total production costs. These fragmented
production blocs are shifted from the existing industrial places to other sites suitable to theirproduction nature. Meanwhile, these fragmented processes are governed by the supervising
function in order for them to successfully operate in the firm’s production streams. This function
involves various kinds of the supporting facilities which are concerned with the information,
logistics, and finance activity. These management and supporting facilities concentrate at a few
large cities in order to employ various kinds of labors.
Similarly, the retailing firms also arrange the locations of the sales facilities in response to a
new emerging sales environment and changing taste of consumers which have been accelerated
by the globalization. Many Large and medium scale retailing firms in major cities have trend to
expand the selling area in order to cope with consumers who attach importance to variety ofgoods. Some of medium scale stores in the middle-sized cities are likely to reduce their goods
assortment to deal with more daily commodities than high-grade goods since these cities cannot
attract adequate potential consumers from surrounding area. While small retailing firms in small
cities keep their operations by providing daily goods in small market area in regions.
These location changes in both the manufacturing and retailing sector contribute to alter the
spatial economic structure in urban system: A few major cities which become larger and morediversified in the economic organization: Some middle-sized cities from which production
processes and relatively large retail stores outflow decline the volume and vitality in bothproduction and retail sector. Many small cities dealing with daily commodities do keep statusquo, and small cities entering production processes are characterized by a single industry. The
spatial economic structure of in the urban system1 is greatly changed by the globalization.
On the one hand, the globalization contributes to alleviate economic disparity among workers
and cities by widely diffusing production processes across regions. Many of the cities entering
production processes have an opportunity to vitalize their economic activity. On the other hand,1

The importance of the urban system in regional economy is pointed out many scholars, forexample, see Capello (2007).
3

it widens the disparity among workers and cities because the kind of employment is polarized
into two groups, simple and complicated, and wage rates largely relay on the group; in addition,
location of the two kinds of employment is determined by the cities’ economic characteristics.
The globalization makes the spatial economic organization in regions complex and often createsa cause of social problems. It is thus the first step for the improving the regional society to know
the mechanism in which the globalization changes the spatial economic structure in the urban
systems.
The paper is organized as follows. Section II explains the location sifts of factories and theretail stores in response to the globalization, and it proposes a hypothesis that elucidates themechanism in which the distribution of economic activities in region is divided into a large cityand many small cities. In Section III the attempts to verify the hypothesis are conducted by theempirical analysis of cities in Japan and Sweden. These attempts reach the evaluation that theresults obtained from the inspection are not inconsistent with the essential contents of the
hypothesis. Section IV summarizes discussion.

II A hypothesis of location distribution of economic activities and population
1 Distribution of production activity in urban system
1-1 Location change of production processes due to globalization
If the economic barriers separating a local market from other markets are taken down,
manufacturing firms have a chance to sell their goods to other local markets, while thefirms are exposed to the risk that similar goods produced by the outside are sold in theirown markets. Demolition of the barriers induces a mega-competition among the firms in
the large market. This competition expels frail firms from the market, and then, it raises
a new harsh competition between the survived firms. Under this competition the priceof goods plays a crucial role, the manufacturing firms lay a stress on the strategies toreduce the total production costs in order to cope with the price competition. A primary
the strategy is to subdivide the production process into several small blocs. Because thissubdivision simplifies the operation of each production bloc, it is easy to enjoy
economies of scale in the production by introducing machineries. And the subdivision
facilitates usage of a number of unskilled labors with low wage rates in the production
process. The manufacturing firms, therefore, fragment the production processes toachieve the lower total production costs.
Furthermore, since each fragmented production process becomes small and simple,
they are easily moved in the long distance. The manufacturing firms can shift many ofprocesses from the existing site to other location places with low-wage labor or low
land rent. As a result, many fragmented production processes are scattered across4

regions and countries. It implies that the globalization changes the existing location
patterns of the factories by the subdivision of the production processes.
Meanwhile, the fragmented processes spread over regions and countries must be
linked by the supervising and management functions. These functions are managed bymany high-skilled workers able to use advanced knowledge and familiar with thecontents of the entire production processes. These supervising and managements’facilities are located at a few large cities in the existing industrial area. The supervising
function needs various kinds of supporting businesses which employ many kinds ofexperts with high-wage rates. They also are concentrated in the same large cities.
Since various kinds of workers are concentrated at a large city, the large city becomes
not only a larger labor market but also a larger consumer-goods market. Hence, thelarge cities attract many diverse and market-oriented industries so that these are likely to
be larger and more diverse city.
1-2 Change of spatial production structure in urban system
Traditionally, the manufacturing firms located their production processes in large andmedium scale cities in the existing industrial area where the processes could enjoy avariety of scale economies. By the progressing globalization some fragmented
production processes move out of the large and medium scale cities to small cities and/or to cities in rural areas. Corresponding to this location change, urban systems arealtered: Although large cities lose some fragmented production processes, as explained
above, it can maintain or increase in its economic volume and diversity since it attracts
the supervising functions and the market-oriented industries. Meanwhile, the medium
scale cities lose some fragmented production processes to other areas and reduce theproduction activity if these cities do not have any attractiveness specific to them. Small
cities in which the fragmented processes flow have an opportunity to vitalize theireconomy, and their industrial structure is characterized by almost a single industry. It isthus said that the globalization reduces the level of the production activities in medium
scale cities so that a few large cities and many small cities become to play a more
important role in supporting the production activity in the urban systems.
2 Distribution of retail activity in urban system
2-1 Location change of retail firms due to globalization
In order to examine the effects of the globalization on the urban system from theviewpoint of the retailers’ location, it is useful to classify the retailing firms into threegroups according to the selling style and goods dealt with in store. Based on this5

criterion, the retailing firms can be classified into the convenience store, thesupermarket store, and the medium scale department store. Each kind of store ischaracterized as follows. Convenience stores usually sell low-price goods, and thesestores are primarily visited by consumers for convenience. Supermarket stores areavailable to consumers for the purpose of purchasing daily necessities where thecriterion of purchases is the price as well as customary preferences. Middle-sized
department stores attach importance to supplying full good assortments to consumers
who focus on the preference, quality and design of goods rather than the price level.
Now, the globalization makes it easy to move goods in the long distance so that much
more diversified goods can be supplied to consumers. Naturally, consumers have atrend to purchase more variety of goods. This trend affects the retail firms’ inventory
strategy. Especially, the medium scale department stores make efforts to increase in thelevel of verity of goods as much as possible. And the trend which consumers prefer tovariety of goods leads consumers to a large city where consumers enjoy more variety ofgoods in their shopping. The medium scale department stores in large cities easily
expand their selling area in order to cope with the consumers’ taste, while some of themedium scale stores in the middle-sized cities face the risk to reduce their retailfunctions to deal with daily commodities like supermarket stores. Because themiddle-sized cities cannot absorb potential consumers which are needed to sustain thedepartment store. Many convenience stores continue to operate retailing activity byproviding consumers with daily goods2. The globalization alters location pattern ofretailing firms as well as that of manufacturing firms.
It is, therefore, said that the globalization reduces the retail activity level in medium
scale cities so that a few large cities and many small cities become to play a more
important role in supporting the retail activity in the urban systems.
2-2 Location change of the retail firms due to expanding market area
Because the decay of the retail sector in the middle-sized cities plays crucially importantrole to change the spatial economic structure in the urban systems. It is surely worth toinquire the mechanism in which the retail firms in these cities reduce their activity level.
In this context, the analysis of the effect of reducing transport costs on the market area
size of the retail firms may contribute to understand the mechanism. This subsection
thus analyzes the change of the equilibrium market area of the retailers by the reductionof transport costs, and it shows that the expansion of the market area of the medium
2

If consumer density in a market area falls, some stores in small cities also
disappear since they cannot maintain the necessary market size.
6

scale department stores is a cause to decline the retail activity of the middle-sized cities.
2-2-1 Framework of analysis of the market area size
A market area size of a retail firm under spatial monopolistic competition is firstly
examined, and then, the examination will be expanded to cover three kinds of theretailers, convenience store, supermarket store, and medium sized department store.
The analysis of the retailers’ markets is implemented under following assumptions.
(I）Consumers live evenly in area with density D. They have liner demand function:
q=a －pr－tu(1)

where q is quantity demanded, a is the maximum reservation price. pr is price of goods.
t is the transportation cost per mile, u is distance from a consumer to a retailer.
(II）All consumers should be supplied with goods and the profits of the retailers shouldbe equal. The retailers must have the same market area: Hexagonal market area isassumed. Under the assumptions of (I) and (II), quantity sold by a retailer in a market isexpressed DQr, and Qr is derived by equation (2),*Qr= 12 π/6  U/cosθ (a  p r  tu)ududθ
0
0

(2)

where U is the radius of the inscribed circle of market in question.
(III）Retailer's cost function is given by equation (4),C= k DQr + Fr .

(3)

where C is total cost, k and Fr are marginal cost and fixed cost, respectively. Profit of aretailer Yr, therefore, is given by equation (4),Yr＝(pr - k) DQr - Fr.

(4)(IV) Retailer sets price to maximize its profit. The price is obtained by equation (5),∂Yr/∂pr=( pr -k)(d Qr /d pr +∂Qr /∂U・dU/d pr)+ Qr =0(5)(V) Since market is under free-entry, new retailer enters the market until the retailer's
7profit becomes zero. Thus equation (6) should be satisfied in free-entry equilibrium,
Yr＝(pr - k) Qr – Fr /D=0

(6)

The free-entry equilibrium conditions are shown by equations (5) and (6). Solving
simultaneous equations (5) and (6) with respective to U and pr gives an equilibrium
market size and price. The value of dU/dpr in equation (5) is depend on the relationshipbetween the retailers: the value is determined by equation (7),dU/dp ＝(dp’/dpr -1)/2tRh,

Rh＝2/30.5(7)where p’ is the price of the most distant firm among the neighboring rival firms. dp’/dpr
is the conjectural variation of price. When the value of dp’/dpr is equal to zero, the Nashequilibrium solution is derived, while the value is 1and -1, so-called Lösch andGreenhut-Ohta equilibrium are obtained3. According to the competition style among
retailers, the equilibrium values vary.
2-2-2 Relationship between the retailer’s form and competition style
The value of the conjectural variation of price can be linked with the completion styleamong retailers: In the competition between the convenience stores, the difference inthe retail prices is easy known to every retailer and the difference is quickly broken
down by the retailers. Thus, the completion can be corresponded to the Löschcompletion type. In the competition between the supermarket stores, it takes some time
for them to arrange the price difference. Therefore, when the retailers change their price,
they usually infer that the rivals’ price would remain the same level. This completion islinked to Nash competition. In the case of the medium scale department stores, they do
not immediately response the price difference from the rivals since the customers of thedepartments are not sensitive to the price difference, but they relatively lay stress on
preference and the brand of goods. If the department stores seek for maximizing profits,
it is consistent for them to infer that rivals raise the price by a unit when the store lowers
its price by a unit. This completion is linked with Greenhut-Ohta completion style4.
2-2-3 Change of the price and market area due to reducing transport costs
As shown by Ishikawa-Toda (1998), the market size of the retailers varies quite
3 See Capozza and Van Order (1978) and Ishikawa-Toda (1998).
4

See Schöler(1993).
8differently according to the three competition style when transport costs fall. Figure 1
shows the three paths of the change of the equilibrium values when the transport costs
falls from 1.47 to 0.4, assuming that F=0.05a4, k=0, D=1.
In Figure 1 point Z indicates the equilibrium values p=0.25a, U=0.4431a when thetransport costs reaches at the upper bound of 1.47. If the Lösch competition styleprevails in the market, lower transport costs imply smaller market area and higher price.
The path of their changes is shown by the line Z-L. In the Nash competition lower
transport costs imply, first, smaller market area before leading to larger market. The
path of the change is shown by the line Z-N. The line Z – G-O illustrates the changeof the equilibrium values in Greenhut-Ohta competition. Table 1 shows the accurate
equilibrium market area size for the five levels in the range from1.4 to 0.2.
Figure１Changes of the equilibrium values due to reducing freight rates

z
t=0.9

t=1.47t=1.04

Table 1

Changes of market area size U due to reducing freight rates

t

Lösch

Nash

Greenhut-Ohta

1.4

0.3891a0.3945a0.4095a1.2

0.3346a0.3499a0.3798a0.4

0.2591a0.3633a0.4382a0.3

0.2539a0.3878a0.4723a0.2

0.2490a0.4304a0.5293a9Because the fixed costs and the maximum reservation price are different between
convenience store and department store, their equilibrium prices and market area sizes
become much more different than those shown in Figure 1 and Table 1.
Meanwhile, it is interesting to know the effect of reducing population density on theretailers’ price and market area size. It is shown from the term of F/D in the equation (7)that as the population density lowers, the retailer’s market area becomes larger irrelative
to the competition style prevailing in goods market.
2-2-4 Characteristics of the competition styles
According to the above analysis of the changes of the market size of the competitionstyles, the characteristics of these styles are summarized as follows:(1) Lösch competition is the style to induce the new competitor to the market. Because
this style makes the necessary market size smaller, it gives the market space to newretailers in the goods market area.
(2) Greenhut-Ohta competition is the style to expel the existing competitor from thegoods market. Because this style makes the necessary market size larger, it does
not provide the space for the existing retailers to operate in the market.
(3) Nash competition style has the both characteristics which the Lösch andGreenhut-Ohta competition possesses, respectively.
2-2-5 Polarization of the location distribution of the retailing firms
As transport costs fall, the market areas of medium scale department stores, which
belong to the Greenhut-Ohta competition style, become larger. The expansion of thesemarket areas decisively alters the location pattern of these stores, and gives a crucially
important impact on the retail structure of the urban system. If the market areas of thesestores must be expanded to maintain their operation, the stores at large cities are
relatively ease to expand the market areas since large cities have some ways to attract
potential customers. But, since middle-sized cities do not have the same attraction
power as large cities, departments in the middle-sized cities cannot easily expand theirmarket areas. Some of them are forced to reduce the retail function to deal with moredaily commodities than high-grade goods, and others disappear from these cities.
Because medium scale department stores often have played a crucial role in the tertiary
sector of the middle-sized cities, the decay of the stores seriously damages the retail
activity in these cities, Due to this decay, the location distribution of the retail firms
becomes divided into a few large city and many small cities. It thus can be said from theviewpoint of the location of the retailing activity that the globalization generates many10

urban systems which are composed with a large city providing a variety of goods andmany small cities dealing with daily goods.
3 Hypothesis on change of distribution of economic activity in urban system
It is possible to establish a hypothesis that the globalization leads the manufacturing andthe retailing activities in the medium-sized cities to decline: Due to decay of these cities,
the distribution of economic actives and population in urban systems is divided into twoparts, a large city and many small cities: As a result, a many urban systems arecomposed with a large and diversified city and many small and simple cities.
It is worth to notice the following facts: The globalization moves the locations of the
production processes and the retail stores. In this case, the geographical removal
distances of these locations are considerably different between the two industries; thedistance of the production processes can be much longer than that of the retail facilities.
Hence, while the effects of the change of the retail stores on the economic structure goin an urban system, those of the production processes go beyond the several urban
systems. The globalization alters the organization in urban system in different ways.
III An inspection of the hypothesis
1 A test of the hypothesis by empirical analysis
In order to test the hypothesis the following two objects are inquired by using the dataof Japan and Sweden during 1990s in which the globalization made greatly progressed.
1) Assuming that the country as a whole is covered by an urban system, it is inquired
how the middle-sized cities’ shares of labors and population decline during 1990s. In
this examination the data of the employees of the manufacturing sector, the retailing,
and the finance/insurance are used5.
2) Even if it would be shown the fact that the distributions of labors and population are
divided into a large city and many small scale cities, it is not clear whether these
distributions in a region are biased to a large city or they are leveled between cities. This
question is examined by using the quotient of convergence (the derivation method of thequotient is shown in Appendix.).

5 The data of Japan are provided by the data book (Toyo keizai, 2002) and the census of Japan(Statistics Bureau, Ministry of Public Management in Japan1990and 2000).The data of Sweden arecited from Statistics Sweden.
111-1 Reduction of economic activity in middle sized cities in Japan
1-1-1 Reduction of middle-sized cities’ shares of manufacturing labors
Let us examine the reduction of the middle-sized cities’ shares of the manufacturinglabors in Japan. This analysis is conducted as follows. There are cities of 659 in Japanas of 1990. The share of the number of labors in the manufacturing sector is derived for659 cities. In turn, the ranking of the city is carried out at order with large share. The
same procedures are taken as of 2002. And then, the variation or the percentage of thevariation of the share of the each ranked city between 1991 and 2002 are derived.
Table 2A illustrates the variation of the share of each ranked city in the range fromthe 15th to the 240th. The rank of cities which decrease the share is converged to between
the 28th and the 97th. It is obvious that the medium scale cities, which are in the second
rank in the urban system, decrease in the share of the manufacturing labors.
Figure 2A

Decrease in the medium cities’ shares of manufacturing workers

Variation
0.00060.00050.00040.00030.00020.00010-0.0001 0-0.0002-0.0003-0.0004

50

100

150

200

250

Rank

Figure 2A1 covers all cities in Japan. It shows the percentage of the share variationof each ranked city. In the rank lower than the 98th, there is no city which decreases inthe share, and, lower rank city leads to higher positive percentage of the variation. It is
obvious that all small cities less than 98th raise the activity standard in the
manufacturing industry6.

6Herfindahl index is derived as 0.0092 and 0.0061 for 1992 and 2002, respectively. The distributionof the share in Japan becomes to be leveled in1990s.
12Figure 2A1

Percentage of the variation of shares of manufacturing workers

Percentage of variation
120
100
80

60
40
20
0
-20 0

100

200

300

400

500

600

700

Rank

-40

1-1-2 Reduction of middle-sized cities’ shares of retailing workers
The percentage of the variation of each ranked city’s share of the retailing workers isshown by Figure 2B. It illustrates that the many cities of which share decreases are in
between the 23 and the 120th; there is no city which decreases the share in the range
lower than the 238th. It can be said that the medium scale cities lose the activity volume
in the retail sector as well as the manufacturing.
Figure 2B

Decrease in the middle size cities’ shares of retailing workers

Percentage of variation
20
15
10
5
0
-5

0

100

200

300

400

500

600

700 Rank

-10
-15
-20

1-1-3 Reduction of the middle cities’ shares of finance/insurance workers
Figure 2C shows the percentage of the increase and decrease of the share of the cities.
As shown in this figure, the cities of which shares decrease are converged to between
the 273rd and the 445th. There are 33 cities of which shares decrease in between the 15th13

to 150th. The cities of which share of the finance/insurance workers decrease is almost
confined to the lower middle part of the range.
Figure 2C Decrease in the middle cities’ shares of finance/insurance workers
Percentage variation
25
20
15
10
5
0
-5 0

100

200

300

400

500

600

700

Rank

-10
-15
-20

1-1-4 Reduction of middle cities’ shares of population
Finally, the variation of each ranked city’s population share is inquired. Figure 2D
shows the percentage of the increase and decrease of the share of the cities. There are
191 cities of which share decreases in between the 15th to the 250th. There is no city ofwhich share decreases in the range lower than the 388th. It is thus obvious that the
middle-sized cities tend to decrease in the share of population.
Figure 2D

Decrease in the middle cities’ shares of population

Percentage of variation
25

20
15
10
5
0
-5

Ranking
0

100

200

300

400

500

600

700

-10

14

1-2 Distributions of economic activity and population in urban systems
Now, let us inquire if the change of the cities’ shares of the number of employments andpopulation in 1990s makes their distributions converge to a large city or level among
cities in urban system. There are 47 prefectures in Japan. It is safe to say that an urban
system is laid in a prefecture. It is possible to classify 24 prefectures into the existing
industrial area and 22 ones to the rural area (since Okinawa prefecture is an isolatedisland, it is excluded in the examination). The industrial prefectures are shown by theblack painted area in Figure 3.
The distribution change of the labors and population in the urban systems is
examined for the existing industrial area and the rural one. The change is indicated byquotient of convergence, QC. Lower quotient implies that the distribution is moreconverged to a large city, higher quotient means the distribution becomes level between
cities in an urban system.
First, the values of QC of the three industries’ labor distributions are obtained for 46
prefectures as of 1990 and 2002. And then, the average values of QC in the two areas
are derived. Comparison of the two average values at the two different times shows the
direction of the change of the distributions in the two areas, converging to a large city orleveling between cities. Table 3 illustrates the average values of QC in the two areas aswell as the directions of the changes of the distributions in the two areas in 1990s.
Figure 3

Existing industrial regions and rural regions in Japan

From the figures shown in Table 2, the followings are founded for each of the threeindustry sectors and population in Japan.

15

Table 2

Change of distributions of economic activities and population in Japan

Manufacturing

Existing industrial area

Rural area

Average QC in 1992

0.6096

0.6327

Average QC in 2002

0.63550.6305＋0.0258-0.0022

Variation of Av. QC
Number of prefecture, leveling20

9Number of prefecture, converging

4

13

Retailing
Average QC in 1991

0.53630.5298Average QC in 2002

0.5426

0.5374＋0.0063＋0.0077

Variation of Av. QC
Number of prefecture, leveling16

10

Number of prefecture, converging

8

12

Finance/insurance
Average QC in 1990

0.37610.3565

Average QC in 2000

0.37880.3569＋0.0028＋0.0005

Variation of Av. QC
Number of prefecture, leveling13

10

Number of prefecture, converging

11

12

Population
Average QC in 1991

0.55310.5569Average QC in 2002

0.56050.5543＋0.007-0.003

Variation of Av. QC
Number of prefecture, leveling18

9Number of prefecture, converging

613(1) The manufacturing factories diffuse from large cities in the existing industrial area
to the neighboring small cities in this area and disperse to relatively large cities in therural area. As a result, the manufacturing labors distribution is leveled in many urban
systems in the existing industrial area. While in many urban systems in the rural area the
distribution converges to a large city. Furthermore, it is interesting that the value of QC
in rural area becomes higher than that of the existing industrial area in 1990s.
(2) The retail industry in small cities in the existing industrial area raises the activity
standard, while that of the large cities relatively falls. Thus, the distribution of retailingworkers in many urban systems in the existing industrial area has a tendency to become
level. While the distribution change of the retailing workers in the rural area is evenly
16divided into the two ways, to converging and to leveling.
(3) The distribution of the finance/insurance activity primarily has a tendency tocentralize at the large cities in the nation and the central cities in regions. There is not aremarkable difference in the change of the distribution between the existing industrial
area and the rural one.
(4) Population distribution of many urban systems in the rural area converges to alarge city, while in the industrial area the distribution has a tendency to be leveled. The
trends in the distribution are almost same with those of the manufacturing industry.
2 A test of the hypothesis by using Swedish dada
2-1 Reduction of economic activity and population in medium scale cities
2-1-1 Reduction of medium scale cities’ shares of labors in production sector
Let us examine the reduction of the middle-sized municipalities’ shares of the labors in
producing sector in 1990s in Sweden.
Figure 4A illustrates the variation of the share of each ranked city from the 50th to289th. Figure 4A does not cover the range from the 1st to 49th since the variations of thelarge cities are too high to show them in this figure. Many of the cities which decreasein the share are in between the 70th and the 228th. Especially, the cities from the 100th
to the 150th greatly decrease in their shares. While there are 24 municipalities which
increase in their shares in the range higher than the 29th and small municipalities lower
than the 230th also raise their shares. It is said that the medium scale municipalities
greatly decrease in the share of the production workers.
Figure 4A

Decrease in medium cities’ shares of labors in the secondary sector

Variation
0.00030.00020.00010-0.0001

0

50

100

150

200

250

300

350 Rank-0.0002-0.000317

2-1-2 Reduction of middle-sized cities’ shares of workers in the tertiary sector
Figure 4B, which covers the rank range from the 20th to 289th, illustrates the variation ofeach municipality’s share of the workers in the tertiary sector. The cities of which shares
decrease are belong to the range between the 60th and the 240th. The decrease of theshares of the municipality ranked from the 57th to 110th are relatively large comparedwith others. Many large municipalities increase their shares, and some of themunicipalities between the 115th and the 132nd also increase in their shares. It can besaid that the medium scale cities lose the activity volume in the tertiary. But, thevariation trend of the tertiary sector in the range from the 100th to the 150th is the
opposite to that of the producing.
Decrease in the medium cities’ shares of workers in the tertiary sector

Figure 4B

Variation
0.00120.001
0.00080.00060.00040.00020-0.0002 0

50

100

150

200

250

300

350 Rank-0.0004-0.0006

2-1-3 Reduction of the middle cities’ shares of finance/business workers
Figure 4C shows the increase and decrease of the share of cities ranked from the 8th to289th. There is no city of which share increases between the 8th and the 282th. On thecontrary, there is no city of which share decreases in between the 1st and the 7th. As
shown in this figure, as the rank becomes lower, the variation of the city’s sharebecomes smaller in the range from the 8th to the 282nd. It is said that the reduction offinance/business activity of the medium scale cities are large compared with the large
scale municipalities and small ones7.

7

Herfindahl index of the finance/ businesses is 0.078 and 0.102 for 1990 and 2000,
respectively. The value of 0.102 is the highest of all indexes. It means that workers of this sector
concentrate at a small number of municipalities.
18

Figure 4C Decrease in the middle cities’ shares of the finance/business workers
Variation
0.0005
0
0

50

100

150

200

250

300

350

Rank

-0.0005-0.001-0.0015-0.0022-1-4 Reduction of the middle cities’ shares of population
Finally, the variation of each ranked city’s population share is inquired. Figure 4D
shows the variation of the share of the cities which are in between the 50th and 289th. All
municipalities from the 71st to the 270th reduce in their shares. Especially, themunicipalities in the range between the 71st and the 117th largely decrease in their sharesof the population compared with other municipalities. There are 28 municipalities which
increase in the share in the rank larger than the 50th. All municipalities lower than the
271st. increase in the share. It is clarified from the examination of the variation ofmunicipalities’’ shares of population that the middle-sized municipalities reduce theshare of population.
Figure 4D

Decrease in the middle cities’ shares of population

Variation
0.00020.000150.00010.00005

0-0.00005 0

50

100

150

200

250

300 Rank-0.0001-0.00015-0.0002-0.00025-0.000319

2-2 Distributions of economic activity and population in urban systems
Let us inquire whether the change of municipalities’ shares of the number of
employments and population in 1990s in Sweden makes their distributions converge toa large city or level among cities in urban systems. There are 21 counties in Sweden. An
urban system is laid in each county. Of all counties 13 are classified into the existing
industrial area and 7 counties to the rural area (since Gotland is an isolated island, it is
excluded in this examination). The industrial counties are continuously located in thesouthern part of Sweden as shown by Figure 5.
Figure 5

Industrial area and rural area in Sweden

Local area

Existing industrial area

Table 3 shows the average values of QC in the industrial area and rural one as well as
the directions of the changes of the distributions in the two areas in Sweden.
The following facts are founded for each of the three industries and population.
(1) The production activities diffuse from large municipalities in the industrial area tothe neighboring small municipalities in this area or disperse to relatively large cities in
the rural area. This trend is the same as that of Japan. In addition, production activities
in Sweden are more concentrated at large municipalities than Japanese ones
(2) The tertiary industry in the urban systems in the rural area becomes more20

concentrated at large municipalities, while that of the industrial area does not change, it
maintains the status quo.
(3) The distribution of the finance/business activity in the industrial area becomesremarkably converged to the large municipalities. Although the average QC in the ruralarea rises, as shown by the number of the counties in the rural area, thefinance/businesses sector has a trend to concentrate at large municipalities. These trends
are different from that of Japan.
(4) Population distributions converge to a large city in many urban systems in both theindustrial area and the rural area. The trend that the distribution of population in theexisting industrial area converges to large municipalities is different from Japanese one.
Table 3

Change of distributions of economic activities and population in Sweden

Secondary

Existing industrial area

Rural area

Average QC in 1990

0.60120.5847

Average QC in 2000

0.60780.5815+ 0.0066－0.0032

Variation of Av. QC
Number of county, leveling92

Number of county, converging

4

5

Tertiary
Average QC in 1990

0.4596

0.4932Average QC in 2000

0.4596

0.48280-0.0104

Variation of Av. QC
Number of county, leveling7１

Number of county, converging

6

6

Finance/Business
Average QC in 1990

0.37630.3983

Average QC in 2000

0.36050.4017-0.0158＋0.0034

Variation of Av. QC
Number of county, leveling42

Number of county, converging

9

5

Population
Average QC in 1990

0.57220.6800

Average QC in 2000

0.56400.6017-0.0082－0.078

Variation of Av. QC
Number of county, leveling3

2

Number of county converging

10

5
21

3 Results of the inspection of the hypothesis
An empirical analysis of the distributions of the labors and population in Japan and
Sweden shows that (1) the economic activities of the middle-sized cities are largely
depressed, while many large cities and some of small cities relatively raise their activity
level. It is, therefore, said that due to the economic decay of the medium scale cities, thedistribution of the economic activity and population in a region becomes divided into
two parts, a large city and many small cities. (2) The distributions of the production
activities and population become relatively converged to a large city in the rural areas inboth Japan and Sweden. On the other hand, the distribution change of population in
the existing industrial area is different between Japan and Sweden. The distribution of
population in the existing industrial area in Japan becomes leveled among cities, whilethat of Sweden becomes converged to large cities. In addition, the distribution of thefinance activity is different between the two countries. The finance activity in theindustrial area in Sweden trends to concentrate at large cities, while the activity isleveled among cities in both areas in Japan.
Although there are some different changes in the distribution patterns between thetwo countries, the results from the empirical analysis second the proposed hypothesisthat as the globalization makes progress, the distributions of economic activity andpopulation become polarized into a few of large cities and many small cities.
IV Concluding remarks
One of the important economic changes that the globalization raises in regions is todivide the location distributions of the economic activity and population into a few large
cities and many small cities. This division causes two different social economic
phenomena; on the one hand, it contributes to alleviate the economic disparity between
cities since the production processes scattered across regions, on the other hands, it
widens the disparity between cities as well as workers because the economic activities
distributed between the cities are divided into the sophisticated activity and the simple
one, and these activities are distributed according to the city’s economic characteristics.
As a result, the globalization makes the spatial economic organization in regions complex andoften creates a cause of social problems.

In order to solve and alleviate the social problems which concern with cities andworkers, it is one of the important steps to clarify and understand the mechanism inwhich the globalization alters the spatial distributions of the economic activities in aregion. This paper proposes a hypothesis from the perspective of the industry’s locationthat explains how the globalization makes the location distributions of production and22retail facilities bipolar to a large city and many small cities; it is shown that according tothese location changes, many urban systems become composed by a large anddiversified city and many small and simplified cities.
The first inspection of the hypothesis by analyzing the data of Japan and Sweden
shows that many medium scale cities decrease in the number of workers of production,
retail, and finance sector compared with large and small cities. While there are somedifferences between two countries in the distribution change of economic activities andpopulation in the existing area and rural area, the results obtained in this inspection are
not inconsistent with the essential contents of the theoretical hypothesis.
Appendix Derivation of quotient of convergence (QC)
Coefficient of the divergence (CD) which indicates the divergence of the population
distribution to the primary city in a region is derived according to Sheppard (1982).
Assuming there are N cities in a region. Let pi denote the population share of a city, ifor all urban population in the region. Then, equation (A1) is established,
1= i 1 p i
N(A1)

If there is no apriori information on the cities, it is rational to infer that the every city
has the same share, pi=1/N. This inference is derived by maximizing equation (A2) inthe subject to the equation (A1)
H



N
i 1

pi L N (i) .

(A2)In the real world there is apriori information on the cities. Thus, let i indicates the rankof a city according to its population size, and multiplying i by its share as a weigh andthen summing up these values. Dividing it by N gives equation (A3). The value of K1
obtained by equation (A3) is considered as the coefficient of divergence of the
population distribution to the primary city in the region.

 p L (i)K 1  (1/N)

Ni1 i N(A3)

If population of the region is distributed equally between cities, the coefficient ofdivergence is given by the equation (A4), and the value of this case is notified by K2,
23

K2=N－２ r 1 L N (r)N(A4)

In this paper the value which is given by equation (A5) is named as the quotient of
convergence, QC.
QC=K1/k2(A5)

The QC is used as an index which shows the characteristic of the distribution of
economic activities between the cities in an urban system.
References
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Sheppard、E.(1982) City size distributions and spatial economic change, International
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Acknowledgements
We thank the participants of the 18/3/2011 seminar at Transport Analysis, Stockholm,
Sweden for their helpful critiques and comments. The second author is financially
supported from Chuo University, 0981（2009~2011), it is gratefully acknowledged.

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