Impact of Consumption Fluctuations by a Declining Population on the Regional Economy

A declining population, which reduces consumption demand and might bring about the stagnation of the local economy, is one of the critical issues in Japan. We estimate the future changes in household consumption expenditure for each municipality, and we analyze the impact on production and the value-added to each municipality, by using the inter-municipal IOT for 54 municipalities in Aichi Prefecture discussed in Chapter 6. Here, for the multi-municipal IOT, we applied a consumption endogenous model that considers commuting between the residences and workplaces of employees between municipalities. In the Nishi-mikawa area, where the automobile manufacturing industry is vibrant, the population is increasing a little bit, leading to increased consumption and, thereby, increased production and value-added. However, owing to the interdependency among the municipalities, production and value-added even in the Nishi-mikawa area are lowered because of the strong spillover effect from other municipalities with declining population.