Exploring the Relationship between Geography, Agglomeration Economies, and Firm Performance in Tanzanian Manufacturing.
- Agglomeration economies are thought to lead to benefits for clustered firms, an ideathat often underpins industrial development schemes. Though the effects and determinants ofthese agglomerations have been studied thoroughly in many developed countries, there isrelatively little work of this kind in the developing country context. Identifying the determinantsof firm clusters in Tanzania can help i... read moren understanding how agglomeration economies can beformed and sustained. One of the primary theoretical determinants of agglomeration is naturaladvantage. This paper makes use of data from the 2013 Census of Industrial Production as wellas data on geography from Henderson et al. (2017) to test how well geographic characteristics ofa district in Tanzania are able to explain agglomeration rates of manufacturing firms in thatdistrict. It finds that geographic variables can explain up to 35% of the variation in firmclustering across districts; however, the relationship between geography and agglomerationvaries across the agglomeration rates of different sectors and sector-pairings. The paperconcludes with a cursory analysis of the relationship between agglomeration and firmperformance. It finds some evidence for a positive relationship between agglomeration andproductivity, and demonstrates that for certain measures of agglomeration, agglomeration’srelationship to productivity varies by firm characteristics.read less