particularly in the service industry. Unlike businesses that deal with material goods, finding transportation and storage are major challenges for many services industries, which means that even if a business is able to secure a lot of employees, profit is dependent on the number of people coming in to the store. Accordingly, if a store locates itself in an area with high population density, where there is potential for large numbers of customers to come by, we can expect that labor productivity will increase. When we looked at actual relationships between the labor productivity of the service industry of municipalities in a DID district and the population density of a DID district, there was a positive correlation (Figure 2-1-45).

(Note) 1 Subjects are prefectures and some ordinance-designated cities (ordinance-designated cities that the gross product values can be acquired from the “Prefectural Accounts”)

2 Labor productivity is calculated by dividing the prefecture’s (city’s) gross product value (net) by number of laborers.

3 The values for labor productivity were from FY2010 and values for population density were from 2010.

Source) Developed by MLIT from Cabinet Office “Prefectural Accounts”, MIC “Regional Statistics Database”

Relationship between Labor Productivity of Service Industries and Population Density of DID Districts

3 For industries that did not have revenues recorded for the 2012 economic census, the figures were calculated without the revenue and number of workers.

4 Municipalities that did not have revenues recorded for the 2012 economic census were not included.

Source) Developed by MLIT from Ministry of Economy, Trade and Industry "2012 Economic Census", MIC "2010 National Census"

From the above information, we can see that if the population accumulates in a city and a concentrated urban structure is realized, the labor productivity will rise, especially in the service industry.

(Efficiency in Administrative Cost due to Accumulation)

If the urban structure is made more compact, the administrative cost will become more efficient. Here, we took the regression in the population and compactness of the city (population density in DID districts) and the expenditures of municipalities, and used those results to look at the relationship between the compactness of a city and its administrative cost. Looking at the relationship between the expenditure per person living in a municipality with a DID district, and the population density of said DID district, we can see that the higher the population density, the lower the administrative cost (Figure 2-1-46).

This result shows the possibility that when a city becomes more compact and has a higher population density, the administrative services are provided more efficiently, which reduces the expenditure per person.

As seen in the above analysis, a concentrated urban structure leads to making the administrative cost more efficient. Also, once it is evident how much cost can be reduced.

(Note) Regression calculated for annual expenditure per person, population (logarithm), population density of DID district (logarithm), for areas like municipalities, then using those results to calculate annual expenditure per person explained by factors other than DID district population density, then plotted the difference between the mean values on the vertical axis and plotted the DID district population density on the vertical axis. For more details regarding the analysis, see Annotation 3.

Source) Developed by MLIT from MIC "Regional Statistics Database"

efficient. Also, once it is evident how much cost can be reduced through efficiency, it would become possible to use that