several policy measures to support industrialization across the country, including the setting up of industrial zones close to major urban centers, including in and around Addis Ababa and Dire Dawa. There is a need for better understanding how best to maximize the potential benefits of the co-location of cities and industrial zones, owing to their linkages across strategic objectives (jobs, investment), spatial policies (access to land and infrastructure) and industry-level issues (access to labor and final markets, regulations).

Some of these factors might lie outside the policy mandate of local urban governments, such as interventions on educational infrastructure or intercity transport infrastructure—but a number of them can be affected directly by city officials.<sup>15</sup> For instance, the importance of tax and licensing fees for firm start-ups and growth suggests that differences in local capacity to carry out functions related to private sector development could have significant effects on city competitiveness. In addition, the ability to provide land and business premises in support of clusters falls within the administrative remit of city governments, and could be used strategically in line with knowledge of comparative advantage and quick wins.

# **References**

Ali, M. (2012). Government’s Role in Cluster Development for MSEs: Lessons from Ethiopia. CMI Report R 2012: 2, Bergen. Norway Altenburg, T. (2010) ‘Industrial policy in Ethiopia’, Discussion Paper No. 2, German Development Institute, Bonn.

Arrow, K.J. (1962) ‘The economic implications of learning by doing’, Review of Economic Studies 29: 155-173 Beck, T., Demirguc-Kunt, A., Levine, R. (2005) ‘SMEs, Growth and Poverty’, Journal of Economic Growth 10(3): 199-229.

Biavaschi, C., Eichhorst, W., Giulietti, C., Kendzia, M.J., Muravyev, A., Pieters, J., RodríguezPlanas, N., Schmidt, R., and Zimmermann, K.F. (2012) ‘Youth unemployment and vocational training’ IZA Discussion Papers 6890, Institute for the Study of Labor (IZA), Bonn Birch, D.L., Haggerty, A. and Parsons, W. (1993) “Who’s Creating Jobs?” Cambridge, Mass.: Cognetics.

Brulhart, M. and Mathys, N.A. (2008) ‘Sectoral agglomeration economies in a panel of European regions’, Regional Science and Urban Economics 28: 348-362 Chinitz, B. (1961) ‘Contrasts in Agglomeration: New York and Pittsburgh’, American Economic Review 51: 279-289.

Djankov, S., R. La Porta, F. López-de-Silanes and A. Shleifer (2002) ‘The Regulation of Entry’, Quarterly Journal of Economics 117: 1-37.

Foster, V, and Morella, E. (2011) ‘Ethiopia's infrastructure: a continental perspective’, World Bank Policy Research Working Paper Series.

Gauthier, B. and Gersovitz, M. (1997). ‘Revenue erosion through exemption and evasion in Cameroon’, Journal of Public Economics, vol. 64(3), pages 407-424.

Gebresilasse, M.M. (2016) ‘Industrial Policy and Misallocation in the Ethiopian Manufacturing Sector’, Working paper, Boston University.

Hanson, G.H. (2001) ‘Scale economies and the geographic concentration of industry’, Journal of Economic Geography 1: 255-276

> 15 For additional findings on how city leaders can influence policy within and outside of their immediate administrative remit and capacity, see the World Bank (2015b) Competitive Cities Report.

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