Firm Inventory Behavior in East Africa

33 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

Firms normally keep certain inventories, including raw materials, work-in-progress, and finished goods, to operate seamlessly and not to miss possible business opportunities. But inventory is costly, and the optimal firm inventory differs depending on various economic conditions, including trade and transport costs. The paper examines firm inventory behavior in East Africa, in which transport connectivity, especially to the ports, is considered as one of the major business constraints. Using firm-level data from Burundi, Kenya, Rwanda, Tanzania, and Uganda, it is shown that transport connectivity significantly affects firm inventory behavior. In particular, road density and transport costs to the port are important to determine the optimal inventory level. With more roads in a city and/or cheaper access to the port, firms would hold smaller inventories.

Keywords: Economic Geography, Transport Economics Policy & Planning

Suggested Citation

Iimi, Atsushi and Humphrey, Richard Martin and Melibaeva, Sevara, Firm Inventory Behavior in East Africa (May 29, 2015). World Bank Policy Research Working Paper No. 7280. Available at SSRN: https://ssrn.com/abstract=2613209

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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