# Section 1 Revitalization of Regional Economies through ICT

### 1. Growth of regional economies through ICT

## (1) Economic growth of Japan and development of regional economy

As the population ages and the birthrate declines, Japan is expected to become a super-aging society with a declining population. If the population ages and declines at the current rate, the working population engaged in production activities will decline in the mid- to long-term, having a negative impact on the economic growth of the country. In order to maintain economic growth under these circumstances, it will be necessary to utilize diverse ideas from the public and to create new added values. In particular, the development of a regional economy will be of great importance for the future economic growth of Japan.

However, the environment surrounding the regional economy has changed rapidly recent years. The regional economy is faced with various issues; for example, the globalization of economic activities along with the spread of ICT, subsequent competition in an international market, and transition from a growth model of a high-growth era based on public projects, and so on. Local society is locked into a vicious circle, becoming less attractive due to the loss of its traditional crafts and authentic local culture, which induces further population decline. When it becomes difficult to secure the labor force due to the population decline, it is feared companies may flow out of the region, with a resultant decline in tax revenues and deterioration of local government finances. Furthermore, the deterioration of local government finances may lead to the degradation of administrative services, which will escalate the population outflow further, triggering a negative chain reaction.

In order to recover from the negative chain reaction, it is necessary for each local area to activate its own production activities and to achieve its own economic growth under a declining population.

## (2) Characteristics of ICT capital and current situation of ubiquitous networks

### A. Economic efficiency of networks through ICT capital

ICT is increasingly taking the role of a new infrastructure for production activities and the importance of ICT capital has dramatically increased. When local communities aspire to attain economic growth whatever the circumstances, it is essential to input and utilize ICT capital actively as an opportunity to bring about change in production activities.

In particular, ICT capital, such as computers, has a characteristic whereby the “economic efficiency of networks” takes effect. As ubiquitous networks progress, information and knowledge exchanges are activated through networks of ICT capital, which will enable us to create various innovations and new added values. In other words, it is fair to conclude that the accumulation of ICT capital and progress of ubiquitous networks improve the productivity of the overall economy through the effect of the economic efficiency of networks, and at the same time, contribute to the economic growth of Japan by providing sources for new added values.

### B. Developing ubiquitous index for each prefecture

For an analysis of the impact of the progress of ubiquitous networks on regional economic growth, we have developed the “Ubiquitous Index” for each prefecture as an index to indicate the progress of ubiquitous networks (See Figure 1-1). From changes to the ubiquitous index it has been found that the index figures are getting larger on a whole and the rate of increase has rapidly accelerated since 2000. When ubiquitous indexes are compared by prefecture, while the figure for Tokyo grew by 7.6 from 2000 to 2005, the figure for Aomori remained as low as a growth of 4.7, showing the dispersion among different prefectures.

## (3) Progress of ubiquitous networks and regional economic growth

The following is the analysis of the impact of ICT capital and the progress of ubiquitous networks on the economic growth of each prefecture, using a macro production function model. Here, the effect of the progress of ubiquitous networks on economic growth is examined by using a ubiquitous index developed for this study.

### A. Estimate equation

The following is the production function model used for this analysis $ ^{1} $ . In order to better understand the difference between prefectures, the model is assigned with prefecture-specific dummy variables.