DETERMINANTS OF TAIWANESE INVESTMENT IN CHINA: AN AGGLOMERATION ECONOMIES-BASED PERSPECTIVE

George Shih-Ku Chen

No 01-09, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: We investigate the impact of agglomeration economies on the distribution of Taiwanese investment in China for the period 1996-2005. We find that the uneven distribution of Taiwanese investment can be explained by agglomeration economies related to industrial linkages, labour-market pooling and monitoring costs. Furthermore, we find evidence that the nature of agglomeration forces attracting Taiwanese investment not only differs across regions but also changes over time. Importantly, we find mild evidence that this investment is affected by a `market crowding effect', or that the benefit from agglomeration decreases once the market size exceeds a critical threshold.

Keywords: Agglomeration economies; China; Taiwanese investment (search for similar items in EconPapers)
Pages: 39 pages
Date: 2009-08
New Economics Papers: this item is included in nep-dev and nep-ure
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