The rise of the 'emerging economies': Towards functioning agricultural markets and trade relations?

Agglomeration spill-over benefits are a major driver of policy creating industrial and science parks across the world. However, agglomeration benefits can be offset by competition arising out of the spatial proximity of firms. In this paper we examine the impact of agglomeration and selection on Taiwanese firms' total factor productivity (TFP) distribution and show that agglomeration causes the log-TFP distribution to have a rightward mean-shift, but that this effect is heterogeneous across firm types. Firms located in science parks and classified in the high-tech sector, which includes biotechnology firms, have the highest log-TFP. Firms other than these, located in science parks and operating in the high-tech sector, have a productivity distribution lying between those located in densely populated and thinly populated regions. However, for low/medium-tech industries such as chemical manufacturing, the productivity distribution for firms located in science parks lags both that of large as well as small cities. Policy aimed at offering science park incentives should be industry-specific to generate positive productivity improvements, otherwise such incentives may simply be used as protection by inefficient firms.