Firms? locational choice and infrastructure development in Tanzania: instrumental variable spatial autoregressive model

Atsushi Iimi, Richard Martin Humphreys and Sevara Melibaeva

No 7305, Policy Research Working Paper Series from The World Bank

Abstract: Agglomeration economies are among the most important factors in increasing firm productivity. However, there is little evidence supportive of this in Africa. Using the firm registry database in Tanzania, this paper examines a new application of the logit approach with two empirical issues taken into account: spatial autocorrelation and endogeneity of infrastructure placement. The paper finds significant agglomeration economies. It is also found that firms are more likely to be located where local connectivity and access to markets are good. The paper finds that dealing with infrastructure endogeneity and spatial autocorrelation in the empirical model is important. According to the exogeneity test, infrastructure variables are likely endogenous. The spatial autoregressive term is significant. As expected, therefore, there are positive externalities of firm location choice around the neighboring areas.

Keywords: Transport Economics Policy&Planning; E-Business; Economic Theory&Research; Private Participation in Infrastructure; Infrastructure Economics (search for similar items in EconPapers)
Date: 2015-06-15
New Economics Papers: this item is included in nep-cse, nep-dcm, nep-tre and nep-ure
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