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Agglomeration economies and the location of Taiwanese investment in China

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Author Info
Chen, George Shih-Ku

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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.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13896.

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Date of creation: 05 Jan 2009
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Handle: RePEc:pra:mprapa:13896

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Related research
Keywords: Agglomeration economies; China; Nested logit model; Taiwanese investment;

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Find related papers by JEL classification:
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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