Spatial and Sectoral Heterogeneity of Occupational Choice in Cameroon
This paper investigates the relationship between location, agglomeration, access to credit, informality, and productivity across cities and industries in Cameroon. Emphasizing the link between micro-foundations and the data, the paper develops and...
| 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/604141531245135339/Spatial-and-sectoral-heterogeneity-of-occupational-choice-in-Cameroon http://hdl.handle.net/10986/29988 |
| Summary: | This paper investigates the relationship
between location, agglomeration, access to credit,
informality, and productivity across cities and industries
in Cameroon. Emphasizing the link between micro-foundations
and the data, the paper develops and estimates a structural
model of occupational choice in which heterogeneous agents
choose between formal entrepreneurship, informal
entrepreneurship, and non-entrepreneurial work. Their
decision-making process is driven by institutional
constraints such as entry costs, tax enforcement, and access
to credit. The model predicts that agglomeration has a
non-monotonic effect on formalization, and entrepreneurial
profits increase with agglomeration effects. Estimating the
model by the generalized method of moments, the paper finds
that the returns to capital and labor are not uniform across
sectors and cities. Manufacturing industries are highly
constrained in capital and the elasticity of capital is
higher in Yaoundé and Douala, whereas labor elasticity is
higher in Kribi. Counterfactual simulations show that an
increase in roads provision can have a substantial impact in
terms of output, formalization, and productivity. A
reduction in the current interest rate has a large and
significant impact on formalization and no significant
effect on business creation. Likewise, while the current tax
rate is suboptimal for most cities, a tax reduction policy
would have a much greater impact on formalization than on
business creation. These effects differ substantially across
cities and sectors, suggesting that those policy instruments
could be implemented accordingly to support formalization
and business creation. |
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