CGE Analysis of Regional Policy in the Northern Kyushu Area

This study develops a policy model in the context of the hierarchical administration system for a regional economy in Japan. In Japan’s case, as a hierarchy of national, prefectural, and municipal (city) administration exists, a different regional policy is established for each level of the hierarchy. Generally, the policy and its evaluation differ according to the priority given either to national interests or to each region’s interests. This was examined by conducting a quantitative analysis using the computable general equilibrium (CGE) model. Particularly, Kitakyushu and Fukuoka cities constitute an administrative region at the city level. Moreover, these two cities along with the rest of Fukuoka Prefecture represent Fukuoka Prefecture. Alternatively, a case for including the adjacent prefecture, Yamaguchi Prefecture in these regions exists. The entire area is called the Northern Kyushu area by combining Fukuoka and Yamaguchi Prefectures. Such a large area gains importance in regional policy because it is placed higher in the hierarchy. This study focuses on five regions, including the rest of Japan. Moreover, given the availability of the input–output tables for these regions, the database to develop the CGE model can be estimated after tabulating the interregional input–output table.