The Determinants of Firm Location in Tanzania
This paper identifies the factors that affect the location of firms in Tanzania. Using a binomialeconometric strategy to address data gaps in firm location at the ward level, the paper groups factors into firm characteristics, market features, and...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/911911540405386304/The-Determinants-of-Firm-Location-in-Tanzania http://hdl.handle.net/10986/30914 |
| Summary: | This paper identifies the factors that
affect the location of firms in Tanzania. Using a
binomialeconometric strategy to address data gaps in firm
location at the ward level, the paper groups factors into
firm characteristics, market features, and two types of
agglomeration economies that capture economies of scale
external to the firm. The benefits of agglomeration may stem
from specialization within and among firms (referred to in
the literature as localization economies) or from
diversification across firms (referred to as urbanization
economies). The distinction between these two lies at the
heart of the discussion on firm location. Regression results
indicate that, of the various factors tested, the most
important determinant driving firm location is the jobs
diversification aspect of urban economies. Other
contributing factors are localization economies (jobs
specialization), competitive markets, and market access.
Based on these findings, policymakers seeking to foster
agglomeration could orient policies toward promoting firm
entry within cities, complementary investments in urban
infrastructure and the urban pool of labor, regulations that
support competition, and improvements in market access for
large cities. But localization economies are also
significant in Tanzania, and could be encouraged through
investment in smaller population centers and increasing
competition and market access beyond the primary urban
centers of Dar-es-Salaam and Arusha. |
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