Firm Productivity and Infrastructure Costs in East Africa

35 Pages Posted: 20 Apr 2016

See all articles by Atsushi Iimi

Atsushi Iimi

International Monetary Fund (IMF); World Bank

Richard Martin Humphrey

World Bank - Sustainable Development Network

Sevara Melibaeva

World Bank - Sustainable Development Network

Date Written: May 29, 2015

Abstract

Infrastructure is an important driving force for economic growth. It reduces trade and transaction costs and stimulates the productivity of the economy. Africa has been lagging behind in the global manufacturing market. Among others, infrastructure is an important constraint in many African countries. Using firm-level data for East Africa, the paper reexamines the relationship between firm performance and infrastructure. It is shown that labor costs are by far the most important to stimulate firm production. Among the infrastructure sectors, electricity costs have the highest output elasticity, followed by transport costs. In addition, the paper shows that the quality of infrastructure is important to increase firm production. In particular, quality transport infrastructure seems to be essential. The paper also finds that agglomeration economies can reduce firm costs. The agglomeration elasticity is estimated at 0.03?0.04.

Keywords: Economic Geography, Transport Economics Policy & Planning

Suggested Citation

Iimi, Atsushi and Humphrey, Richard Martin and Melibaeva, Sevara, Firm Productivity and Infrastructure Costs in East Africa (May 29, 2015). World Bank Policy Research Working Paper No. 7278. Available at SSRN: https://ssrn.com/abstract=2613167

Atsushi Iimi (Contact Author)

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Richard Martin Humphrey

World Bank - Sustainable Development Network

United States

Sevara Melibaeva

World Bank - Sustainable Development Network

United States

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