This study aims to empirically investigate the determinants of service industry productivity,
such as economies of scale and economies of density. By using establishment-level data
related to personal service industries in Japan, the study estimates the production functions
for both value-added and physical output measures. In almost all the service industries
examined, significant economies of scale and economies of density are observed, wherein
productivity increases by 7% to 15% when the municipality population density doubles …

The purpose of this paper is to investigate the basic facts of service industry productivity,
such as economies of scale, economies of scope, and economies of density in Japan.
Specifically, by using establishment-level data on personal-service industries in which the
simultaneity of production and consumption is especially prominent, the paper estimates
production functions both for value-added and physical output measures. Key findings from
the analysis are as follows: 1. In almost all the examined service industries, economies of …