THE INFLUENCE OF LOCATION ON PRODUCTIVITY - MANUFACTURING TECHNOLOGY IN RURAL AND URBAN AREAS

Policies to counter the growing discrepancy between economic opportunities in rural and urban areas have focused predominantly on expanding manufacturing in rural areas. Fundamental to the design of these strategies are the relative costs of production and productivity of manufacturing in rural compared to urban areas. This study develops information that can be used to assess the productivity of manufacturing in rural and urban areas. Production functions are estimated for the meat-products and household-furniture industries to investigate selected aspects of location and productivity. The results show that the effect of location on productivity varies with industry, size, and the timing of entry. Although the analysis is specific to two industries, it suggests that development policies targeting manufacturing can be more effective if they focus on industries and plants with characteristics that predispose them to the locations they support.