Location and Enterprise Choice: A Tanzanian Case Study

Some of the assumptions of the theory of enterprise choice with respect to location, associated with von Thünen, require modification when labour, not land, is the scarce factor of production. Using these modified assumptions, and farm level data on grain and charcoal enterprises, a model of the local economy around the town of Dodoma in central Tanzania is constructed. At a distance of some 24 kilometres from the town grain replaces charcoal. Information on grain purchases by government‐registered villages suggests that this description of the spatial economy is a plausible one. The implications of this description for pricing and extension policies are also considered.