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This paper demonstrates that when one new job is generated by attracting a new business in the tradable sector in a local economy, a significant number of additional jobs are created in the nontradable sector when labor mobility is high. However, these multipliers disappear when labor mobility is low. This paper confirms that regions with higher labor inflow have larger multipliers. Furthermore, the spillover effect of agglomeration economies in the tradable sector is significantly positive on the nontradable sector.

First, this paper empirically evaluates the incidence of the Japanese place-based job creation program, which has rarely been studied in Japan. The program increases employment, especially in the agricultural, retail trade, and service sectors, which most treated municipalities promote. Second, this paper explores the municipalities that the program affects most. Those with large aging populations and those with small working age populations decrease the effects of the program. Third, this paper assesses the externality effect of this program and does not observe a strong reduction in sales, workers, or establishments in the neighboring municipalities of a treated municipality.

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