Discussion Papers 2024


"Urban Redevelopment Program and Demand Externality"

Author Name

Kawaguchi, Daiji, Keisuke Kawata and Chigusa Okamoto


April 2024

Full Paper PDF file


Demand externality generated by the agglomeration of commercial activities is a poten- tial source of city formation. We study the impact of a large-scale urban redevelopment program involving the construction of a shopping complex at the center of Tokyo. The redevelopment program increased the land price and commercial building use in its neighborhood. It also increased the total sales of neighborhood firms but not their profits. We argue that the redevelopment program generated substantial demand ex- ternality but the benefit fell on the landlord.

Keywords: Demand Externality, Shopping Externality, Urban Redevelopment Pro- gram