This paper informs the debate on the existence of agglomeration effects in Africa. It uses a structural estimation approach to investigate the impact of agglomeration economies and forward linkages on the localization of French affiliates in Africa. Using a sample of French subsidiaries in Africa, we compate the theoretically derived measure of market potential with the standard form used by geographers and with a measure of local demand. Our results show that maket potential matters for location choice.
Models of Trade with Imperfect Competition and Scale Economies
We develop an economic geography model where mobile skilled workers choose to either work in a production sector or to become part of an unproductive elite. The elite sets income tax rates to maximize its own welfare by extracting rents, thereby influencing the spatial structure of the economy and changing the available range of consumption goods. We show that either unskilled labor mobility, or rent-seeking behavior, or both, are likely to favor the occurence of agglomeration and of urban primacy.