The Political Demand: Spatial Equity without Compromising Productivity
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MAP 2.1
Spatially Concentrated Economic Activity in Libya (left) and Iraq (right) Spatially concentrated economic activity Libya
Iraq
Source: http://gecon.yale.edu/data.php. Accessed August 18, 2009. Methodology described in Nordhaus 2006.
Benghazi, Basra, and Kirkuk, as investment and labor are drawn into the metropolis by the economies of agglomeration. The evidence from MENA confirms that investment and production are indeed more efficient in areas of dense economic activity. In Egypt (World Bank 2009c) researchers broke down the determinants of labor productivity in industrial firms. They looked at the companies’ sector, years of operation, size, and so on. Controlling for all these variables, they found that a firm in Upper Egypt, Egypt’s lagging area far from Cairo, had labor productivity 44 percent lower than elsewhere. The Tunisian government collects investment data and household consumption data by governorate. It is, therefore, possible to see how much investment it took in each governorate to generate the same increase in household consumption. The calculations confirm the power of agglomeration economies. It takes much more investment to support a given value of consumption growth in the lagging areas of the south and the northwest than it does in the leading areas of Tunis, the northeast and the center-east (table 2.2). The Tunisian figures may understate the spatial disparities between the rates of return on investment in different regions. First, firms sometimes register their investment at the location of their head office, even if the actual physical investment takes place elsewhere. Investment in the Tunis area may, therefore, be overstated. Second, remittances usually flow from rich areas to poor areas, so spatial disparities in income are bigger than disparities in consumption. But conversely, the ratios do not capture the nonconsumption benefits of investment in social services.