A three-layer model of borrowed size: empirical insights from Japan

This study revisits the concept of borrowed size to explain regional growth beyond that of traditional agglomeration economies. Although scale advantages are typically linked to density, many smaller regions increasingly benefit from relational and institutional ties with metropolitan areas. We propose a three-layer framework comprising scale-related externalities, mediating network connectivity, and institutional and relational foundations. Using data from Japanese prefectures, we demonstrate how improved accessibility, industrial specialisation and national spatial planning enable the diffusion of agglomeration benefits beyond urban cores. Drawing on the Japanese context – characterised by a highly centralised governance structure, pronounced metropolitan concentration and rapid population ageing – we illustrate how national spatial strategy and fiscal transfer mechanisms interact with local industrial specialisations to sustain borrowed-size effects in peripheral regions. These patterns suggest that spatial externalities can operate through non-physical channels, challenging the agglomeration–dispersion dichotomy. Borrowed size is reframed as an active, institutionally mediated process rather than a passive spillover effect, and underscores the role of governance and social capital in shaping inclusive development. Thus, the Japanese case offers transferable insights to other countries undergoing demographic transitions and seeking to balance metropolitan dynamism with regional equity. These findings have practical implications for regional policy in decentralised ageing economies.