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Market Potential, Agglomeration Effects and the Location of French Firms in Africa

Alain Pholo, Michel Tenikue () and Baraka Nafari

No 2017-19, LISER Working Paper Series from LISER

Abstract: The impact of agglomeration economies in African urban development has not been clearly measured yet. To inform the debate on their existence and their intensity, there is a need for empirical studies providing new evidence on agglomeration effects in the African region. In this research we contribute in bridging this gap by investigating, through a structural estimation approach, the impact of agglomeration economies and forward linkages on the localization of French affiliates in Africa. Using a sample of French subsidiaries in Africa, we compare the theoretically derived measure of market potential with the standard form used by geographers and with a measure of local demand. Our results show that Market Potential matters for location choice. However, the semi-elasticity estimates suggest that the intensity of demand linkages in Africa is lower than what has been observed in the European Union. Moreover, their effects seem to be insignificant when we consider the spillover variables. These spillover effects have a positive and significant impact on location which suggests that agglomerations effects are at play throughout Africa.

Keywords: agglomeration economics; location of firms; market potential (search for similar items in EconPapers)
JEL-codes: F12 F15 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2017-12
New Economics Papers: this item is included in nep-afr, nep-geo and nep-ure
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