Manufacturing production in both developed and developing economies tends to be highly geographically concentrated in cities and industrial clusters. Firms are drawn together for a variety of reasons, mostly motivated by the desire to reduce the costs of transporting goods, people, and ideas. In Vietnam, for example, large firms are surrounded by thousands of small enterprises in two major industrial clusters near Hanoi and Ho Chi Minh City.
In Africa, the "Suame Magazine" near Kumasi, Ghana is home to thousands of small metalworking firms. Arusha, Tanzania is the site of several clusters of furniture manufacturers. Empirical evidence shows that there are productivity benefits for firms that locate in clusters like these; these benefits are referred to as "agglomeration economies." However, not all firms benefit from agglomeration equally. As such, spatial industrial policies that influence the location choice of firms may be an effective tool in accelerating the pace of industrialization but also in ensuring an equitable distribution of the gains.
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