Agglomeration economies and the location of Taiwanese investment in China

George Shih-Ku Chen

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the effect of agglomeration economies on Taiwanese greenfield investors' location choice in China from 1996 to 2005. Using a nested logit model, we find that Taiwanese investors first select a region in China where he or she wants to invest, before selecting the best province within that region. Furthermore, we find evidence that, since 2000, market access, industrial linkages and monitoring costs have become important agglomeration forces driving Taiwanese investors' location choice in China. Finally, we discover that the nature of agglomeration economies varies extensively for Taiwanese investors across different industries. Taken together, these findings suggest that the Chinese government must formulate region-wide development strategies and industry-specific policies if it wants to attract more Taiwanese investment in the near future.

Keywords: Agglomeration economies; China; Nested logit model; Taiwanese investment (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Date: 2009-01-05
New Economics Papers: this item is included in nep-cna, nep-dev, nep-tra and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13896

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