Regional Income Inequality in the Post War Japan

The objective of this study is to measure regional income inequalities in Japan in the postwar period by using the weighted coefficient of variation and the Theil T index and explore factors determining regional income inequalities by using several inequality decomposition techniques. Regional inequality in per capita GDP, as measured by the weighted coefficient of variation, first increased and reached a peak in 1958 at 0.38. It then declined steadily and hit the bottom at 0.25 in 1979. After 1979, it rose again and reached a peak in 1990 at 0.37. There is a declining trend after 1990. To a considerable extent, regional inequality in per capita GDP is determined by regional inequality in labor productivity. Regional inequality in labor participation rate is not significant in the determination. A rapid rise in primary sector’s inequality in per capita GDP is attributable to a rise in its inequality in employment share. On the other hand, a decrease in secondary sector’s inequality in per capita GDP until the middle of the 1970s is due mainly to a fall in its inequality in employment share, while a decrease in tertiary sector’s inequality in per capita GDP until the middle of 1960s is attributable to a fall in its inequality in both labor productivity and employment share. Finally, a rise and a fall in secondary and tertiary sectors’ inequalities in per capita GDP in the 1980s and the 1990s are determined by their inequalities in labor productivity, since their inequalities in employment share were low and stable in the period.