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

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  • Iimi,Atsushi
  • Humphreys,Richard Martin
  • Melibaeva,Sevara

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.

Suggested Citation

  • Iimi,Atsushi & Humphreys,Richard Martin & Melibaeva,Sevara, 2015. "Firms? locational choice and infrastructure development in Tanzania : instrumental variable spatial autoregressive model," Policy Research Working Paper Series 7305, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7305
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    Keywords

    Transport Economics Policy&Planning; E-Business; Economic Theory&Research; Private Participation in Infrastructure; Infrastructure Economics;

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