Discussion Papers 2024

CIRJE-F-1227	"Urban Redevelopment Program and Demand Externality"
Author Name	Kawaguchi, Daiji, Keisuke Kawata and Chigusa Okamoto
Date	April 2024
Full Paper	PDF file
Remarks

Abstract
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

Abstract

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