Regional Market Integration and City Growth in East Africa: Local but no Regional Effects?

We investigate changes in the spatial concentration of economic activities after the establishment of a regional economic community between Kenya, Tanzania, and Uganda in 2001. Measuring city growth using satellite imagery of lights emanated out to space at night, we demonstrate that cities close to the community’s internal borders expanded more than other cities further away. The growth effect is temporary and also highly localized: only cities less than 90 minutes of travel from the border experience an acceleration in growth rates; after four years growth rates revert to their pre-treatment level. We show that this is consistent with an asymmetric reduction in trade costs for two types of trade modalities that co-exist in many parts of sub-Saharan Africa, local small-scale trade and regional large-scale trade, with a larger reduction in costs of the former. Yet, while local effects are relatively large, equivalent to a 5.6% higher GDP for cities near the EAC’s internal borders, they do not imply a large reorganisation of economic activity across space nor a substantial alteration of countries’ urban systems.