Industrial Location in Developing Countries

Despite a diminishing role in industrial countries, the manufacturing sector continues to be an engine of economic growth in most developing countries. This article surveys the evidence on the determinants of industry location in developing countries. It also employs micro data for India and Indones...

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Main Authors:	Deichmann, Uwe, Lall, Somik V., Redding, Stephen J., Venables, Anthony J.
Format:	Journal Article
Published:	World Bank 2012
Subjects:	economic growth economists empirical evidence empirical research empirical studies environments equilibrium intermediate goods labor costs labor markets pollution population growth production costs public goods purchasing power tax rates tax revenue tradeoffs wage differentials wages
Online Access:	http://hdl.handle.net/10986/4421

id	okr-10986-4421
recordtype	oai_dc
spelling	okr-10986-44212021-04-23T14:02:17Z Industrial Location in Developing Countries Deichmann, Uwe Lall, Somik V. Redding, Stephen J. Venables, Anthony J. economic growth economists empirical evidence empirical research empirical studies environments equilibrium intermediate goods labor costs labor markets pollution population growth production costs public goods purchasing power tax rates tax revenue tradeoffs wage differentials wages Despite a diminishing role in industrial countries, the manufacturing sector continues to be an engine of economic growth in most developing countries. This article surveys the evidence on the determinants of industry location in developing countries. It also employs micro data for India and Indonesia to illustrate recent spatial dynamics of manufacturing relocation within urban agglomerations. Both theory and empirical evidence suggest that agglomeration benefits, market access, and infrastructure endowments in large cities outweigh the costs of congestion, higher wages, and land prices. Despite this evidence, many countries have tried to encourage industrial firms to locate in secondary cities or other lagging areas. Cross-country evidence suggests that fiscal incentives to do so rarely succeed. They appear to influence business location decisions among comparable locations, but the result may be a negative-sum game between regions and inefficiently low tax rates, which prevent public goods from being funded at sufficiently high levels. Relocation tends to be within and between agglomerations rather than from large cities to smaller cities or lagging regions. Rather than provide subsidies and tax breaks, policymakers should focus on streamlining laws and regulations to make the business environment more attractive. 2012-03-30T07:12:34Z 2012-03-30T07:12:34Z 2008-09-01 Journal Article World Bank Research Observer 1564-6971 http://hdl.handle.net/10986/4421 CC BY-NC-ND 3.0 IGO http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ World Bank World Bank Journal Article South Asia East Asia and Pacific India Indonesia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
topic	economic growth economists empirical evidence empirical research empirical studies environments equilibrium intermediate goods labor costs labor markets pollution population growth production costs public goods purchasing power tax rates tax revenue tradeoffs wage differentials wages
spellingShingle	economic growth economists empirical evidence empirical research empirical studies environments equilibrium intermediate goods labor costs labor markets pollution population growth production costs public goods purchasing power tax rates tax revenue tradeoffs wage differentials wages Deichmann, Uwe Lall, Somik V. Redding, Stephen J. Venables, Anthony J. Industrial Location in Developing Countries
geographic_facet	South Asia East Asia and Pacific India Indonesia
description	Despite a diminishing role in industrial countries, the manufacturing sector continues to be an engine of economic growth in most developing countries. This article surveys the evidence on the determinants of industry location in developing countries. It also employs micro data for India and Indonesia to illustrate recent spatial dynamics of manufacturing relocation within urban agglomerations. Both theory and empirical evidence suggest that agglomeration benefits, market access, and infrastructure endowments in large cities outweigh the costs of congestion, higher wages, and land prices. Despite this evidence, many countries have tried to encourage industrial firms to locate in secondary cities or other lagging areas. Cross-country evidence suggests that fiscal incentives to do so rarely succeed. They appear to influence business location decisions among comparable locations, but the result may be a negative-sum game between regions and inefficiently low tax rates, which prevent public goods from being funded at sufficiently high levels. Relocation tends to be within and between agglomerations rather than from large cities to smaller cities or lagging regions. Rather than provide subsidies and tax breaks, policymakers should focus on streamlining laws and regulations to make the business environment more attractive.
format	Journal Article
author	Deichmann, Uwe Lall, Somik V. Redding, Stephen J. Venables, Anthony J.
author_facet	Deichmann, Uwe Lall, Somik V. Redding, Stephen J. Venables, Anthony J.
author_sort	Deichmann, Uwe
title	Industrial Location in Developing Countries
title_short	Industrial Location in Developing Countries
title_full	Industrial Location in Developing Countries
title_fullStr	Industrial Location in Developing Countries
title_full_unstemmed	Industrial Location in Developing Countries
title_sort	industrial location in developing countries
publisher	World Bank
publishDate	2012
url	http://hdl.handle.net/10986/4421
_version_	1764391286606921728

Industrial Location in Developing Countries

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