Firm Location, Transport Connectivity, and Agglomeration Economies : Evidence from Liberia
Transport connectivity is among the most important factors in increasing firm productivity and accelerating economic development. The literature generally supports the idea of agglomeration economies, although there is little evidence of their effe...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/327291524055808723/Firm-location-transport-connectivity-and-agglomeration-economies-Evidence-from-Liberia http://hdl.handle.net/10986/29713 |
| Summary: | Transport connectivity is among the most
important factors in increasing firm productivity and
accelerating economic development. The literature generally
supports the idea of agglomeration economies, although there
is little evidence of their effectiveness in Africa. There
are often empirical challenges, such as spatial
externalities and endogeneity of infrastructure development.
Using firm registry data in Liberia, this study used the
instrumental variable spatial autoregressive model to
examine the effects of transport connectivity on firms'
decisions on where to locate. The study found significant
spatial autocorrelation and possible endogeneity related to
transport infrastructure, and that firms are more likely to
be located where market accessibility is better. The data
indicated strong agglomeration economies, indicating that
the primary city, Monrovia, is likely to continue to grow
and attract more people and firms, and that secondary cities
can also grow with greater transport connectivity between
populated areas, such as district centers. |
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