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Working Paper

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

BUSINESS ACTIVITIES EMPLOYMENT VEHICLE OPERATING COSTS ECONOMIC GROWTH INFRASTRUCTURE SERVICES PRODUCTION AGGLOMERATION EFFECT MATERIALS CARGO HANDLING TRANSPORT INFRASTRUCTURE GENERATION EXPORTS ELASTICITY INFRASTRUCTURE DEVELOPMENT POLITICAL ECONOMY ECONOMIC STRUCTURE PUBLIC INFRASTRUCTURE INDUSTRIAL DEVELOPMENT VARIABLES LOCAL CONNECTIVITY HIGHWAY SYSTEM TAX INPUTS REGISTRY LOCAL GOVERNMENT FINANCE TRANSPORTATION INFRASTRUCTURE TRANSPORT ACCESS DRIVERS COMPUTER OPEN ACCESS TRANSPORT MODES ECONOMIC ACTIVITY CHOICE VEHICLE DATA INFLUENCE TRANSPORT INVESTMENTS ROAD INFRASTRUCTURE ACCESS CARGO COSTS ROAD NETWORK TRANSPORT INTERSTATE HIGHWAY SYSTEM INFRASTRUCTURE PROJECT RENT CUSTOMS RAIL LINE COST OF POWER GROWTH PATH PRODUCTIVITY ECONOMETRICS EXTERNALITIES INDUSTRIALIZATION INCREASING RETURNS CRITERIA MARKETS PRIVATE INVESTMENT ELECTRICITY SUPPLY CONNECTIVITY WEB ENTERPRISES RAIL STATIONS PORTS NATURAL RESOURCES ROUTE ECONOMIC RESEARCH RESIDENTIAL USERS INFRASTRUCTURE INFRASTRUCTURE INVESTMENT MANUFACTURING USERS TECHNOLOGY ECONOMIC ZONES TRANSACTION VALUE ADDED FIRMS TRANSPORTATION MARKET POTENTIAL WAGES GLOBAL MARKET POLICIES RESULTS MARKET CONDITIONS NESTED LOGIT MODEL VALUE COMPETITIVENESS POWER FOREIGN DIRECT INVESTMENT ELECTRICITY ELASTICITIES CREDIT PRODUCT DIFFERENTIATION ACCESSIBILITY MARKET ACCESSIBILITY AGRICULTURE INFRASTRUCTURE DEVELOPMENTS MEASUREMENT TRANSACTION COSTS RAILWAY HIGHWAYS GOOD TRANSPORT ENDOGENOUS VARIABLES DIVERSIFICATION TAX REVENUE ROADS ADMINISTRATION INFRASTRUCTURE INVESTMENTS RESULT TAXATION HIGHWAY TRADE RAILWAYS INTERSTATE HIGHWAYS THEORY BUSINESSES BUSINESS INVESTMENT NETWORK AGGLOMERATION ECONOMIES POSITIVE EXTERNALITIES RAILROADS AUTOREGRESSION PERFORMANCE RAIL POLICY SUPPORT PROFIT INVESTMENTS COMMODITIES ROAD CONDITIONS ECONOMIC GEOGRAPHY DATABASE TRANSPORT COSTS VEHICLE OPERATING COMMODITY INTERNATIONAL MARKETS AGGLOMERATION PRICES AGGLOMERATION EFFECTS DEVELOPMENT POLICY HISTORIC CITIES
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World Bank, Washington, DC
Africa | Tanzania
2015-07-16T15:39:18Z | 2015-07-16T15:39:18Z | 2015-06

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.

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