Regional Isolation and the Absence of Demographic Spillovers: Evidence from Japanese Aging Dynamics

Kikuchi, Tatsuru (2025): Regional Isolation and the Absence of Demographic Spillovers: Evidence from Japanese Aging Dynamics.

Abstract

This paper tests whether demographic aging shocks propagate across Japanese municipalities through spatial and economic network channels. Using quarterly panel data on 4,547 municipalities from 2018 to 2024, I apply the spatial treatment effect framework from \citet{kikuchi2024dynamical} and \citet{kikuchi2024stochastic}, extended with a Lévy–Brownian process \footnote{A temporal jump-diffusion process combining continuous Brownian motion with Lévy jumps.} to capture discontinuous crisis events alongside continuous evolution. The central finding contradicts conventional assumptions: aging shocks remain strictly localized with zero spillovers despite connected infrastructure and dense networks. Five analyses establish this result. Perturbative decomposition shows 99.82 percent of variation explained by direct effects. Treatment effect estimates (ATT=0.355pp, ATE=0.541pp) exclude spillover components. General equilibrium multipliers of 1.04 indicate minimal amplification. Stochastic uncertainty quantification reveals that while Lévy jumps raise crisis probability from 3 to 12 percent, tail risk remains localized. Temporal trends document increasing regional isolation. The absence of spillovers reflects fundamental isolation: Tokyo concentration, infrastructure decay, service withdrawal, and economic hollowing transform Japan's spatial structure from integrated to fragmented. Regional coordination policies are ineffective; local interventions are sufficient.

• Item Type: MPRA Paper
• Language: English
• Keywords: Population aging, demographic spillovers, regional isolation, spatial econometrics, Levy processes, Japan
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C21 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation; J - Labor and Demographic Economics > J1 - Demographic Economics > J11 - Demographic Trends, Macroeconomic Effects, and Forecasts; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics

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