access to customers. We designed our survey to study the location choice of managers, and thus we asked all firms that relocated or considered relocating in the previous year a question on the reasons for their location choice. Managers were given a list of 18 possible reasons and were asked to select up to 3 main reasons for their location choice.<sup>39</sup> Panel B of Table 4 shows the share of managers reporting each potential reason among their top reasons. To limit the number of rows in the table, we report the three most common options selected by managers, and then the options related to pollution, for comparability. The table shows that: (i) access to customers is the most important reason driving location choice, with more than one in two firms selecting it among their top choices; (ii) in contrast, avoidance of air pollution is not a major reason for location choice, with less than 10% of firms reporting it among their top choice (the relevance of exposure to water and solid pollution is even lower). This provides direct evidence that firms locate on busy (and polluted) roads to access customers.<sup>40</sup> Finally, Figure 7 lists the main constraints to growth reported by firms in our survey, and we see that lack of demand is the main constraint. This highlights that small firms struggle to access demand in this context, which then justifies why access to demand considerations are the main reasons driving their location choice. On the other hand, Table 4 makes clear that firms do not take pollution exposure into account in their location choice, hence they do not try to avoid it.

Interpreted through the lenses of the model, these results confirm that the productivity benefits of locating in more polluted areas outweigh the potential costs resulting from higher pollution exposure, potentially higher wages due to compensating differentials, and higher rents. This is consistent with the result from Table 3 that firm profits are higher near larger roads.

**Location choice exposes workers to pollution.** As firms locate primarily near polluted roads, this opens up the possibility that workers may be exposed to substantial pollution. As discussed in Section 2, pollution levels in urban Uganda are high. Our data shows that 83% of employees in our sample work in areas of the city (i.e., grid cells) with average levels of PM2.5 above the 24-hour fine particle standard recommended by the EPA (35 _μ_ g/ _m_<sup>3</sup> ). In addition, exposure can be exacerbated by the fact that workers in this context operate mostly in the open air and in the immediate vicinity of the roadside. Our survey shows direct evidence of this: Panel C of Table 4 reveals that 64% of firms produce only outside or mostly outside, and only 16% of firms produce entirely inside. This underscores the importance of understanding the role of managerial quality in protecting workers from pollution exposure through either avoidance or adaptation. We turn to this next.

> 39This information is available for 138 firms (13% of the sample).

> 40Figure A20 reports the distribution of all 18 possible reasons for location choice. Access to customers is clearly the primary reason.

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