Mind the Gap? A Rural-Urban Comparison of Manufacturing Firms

Rijkers, Bob ; Soderbom, Mans ; Loening, Josef

关键词: ACCESS TO CREDIT;    ACCESS TO FINANCE;    ACCESS TO FINANCING;    ACCESS TO INFORMATION;    ACCESS TO MARKETS;   

DOI  :  10.1596/1813-9450-4946
RP-ID  :  WPS4946

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper compares and contrasts theperformance of rural and urban manufacturing firms inEthiopia to assess the impact of market integration and theinvestment climate on firm performance. Rural firms areshown to operate in isolated markets, have poor access toinfrastructure and a substantial degree of market power,whereas urban firms operate in better integrated and morecompetitive markets, where they have much better access toinputs. Fragmentation may also help explain why urban firmsare much larger, much more capital intensive and why theyproduce much more output per worker. Capital intensity andlabor productivity are strongly correlated with firm size.Manufacturing technology choice does not vary stronglyacross space and increasing returns to scale are modest atbest, suggesting that rural-urban differences in output perworker are predominantly driven by differences in capitalintensity and Total Factor Productivity (TFP). The averageTFP of firms in rural towns is much higher than that ofrural firms in remote areas, but small firms in rural townsare not significantly less productive than small firms inother urban areas. A key finding of the paper is that marketfragmentation and investment climate constraints impair thegrowth of the rural non-farm sector. Whereas urban firmsexhibit a healthy dynamism, rural firms are stagnant andlack incentives to invest. Paradoxically, limited localdemand due to market fragmentation is the most pressingconstraint for rural firms, even though they face moresevere supply-side constraints than urban firms. Promotingmarket towns in Ethiopia might be an effective means ofcapitalizing on the gains from market integration.