Industrial Agglomeration, Geographic Innovation and Total Factor Productivity: The Case of Taiwan

Chia-Lin Chang () and Les Oxley

Working Papers in Economics from University of Canterbury, Department of Economics and Finance

Abstract: The paper analyses the impact of geographic innovation on Total Factor Productivity (TFP) in Taiwan. Using 242 four-digit standard industrial classification (SIC) industries in Taiwan in 2001, we compute TFP by estimating Translog production functions with K, L, E and M inputs, and measure the geographic innovative activity using both Krugman's Gini coefficients and the location Herfindahl index. We also consider the geographic innovation variable as an endogenous variable and use 2SLS to obtain a consistent, albeit inefficient, estimator. The empirical results show a significantly positive effect of geographic innovation, as well as R&D expenditure, on TFP. These results are robust for the Gini coefficients and location Herfindahl index, when industry characteristics and heteroskedasticity are controlled. Moreover, according to the endogeneity of geographic innovation, the Hausman test shows that the geographic innovation variable should be treated as endogenous, which supports the modern theory of industrial clustering about innovation spillovers within clusters.

Keywords: Industry agglomeration; Geographic innovation; Total factor productivity; Cluster; Research and Development (search for similar items in EconPapers)
JEL-codes: L60 O32 O33 R12 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-07-01
New Economics Papers: this item is included in nep-eff, nep-geo, nep-knm, nep-tid and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Industrial agglomeration, geographic innovation and total factor productivity: The case of Taiwan (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cbt:econwp:08/14

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