Firms? Locational Choice and Infrastructure Development in Tanzania: Instrumental Variable Spatial Autoregressive Model

28 Pages Posted: 10 Jan 2017  

Atsushi Iimi

International Monetary Fund (IMF); World Bank

Richard Martin Humphreys

Independent

Sevara Melibaeva

World Bank - Sustainable Development Network

Date Written: June 15, 2015

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, Economic Geography

Suggested Citation

Iimi, Atsushi and Humphreys, Richard Martin and Melibaeva, Sevara, Firms? Locational Choice and Infrastructure Development in Tanzania: Instrumental Variable Spatial Autoregressive Model (June 15, 2015). World Bank Policy Research Working Paper No. 7305. Available at SSRN: https://ssrn.com/abstract=2895404

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 Humphreys

Independent

No Address Available

Sevara Melibaeva

World Bank - Sustainable Development Network

United States

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