Industrial Policy, Agglomeration and Productivity in China’s Textile Industry
Date Issued
2011
Date
2011
Author(s)
Li, Hsiao-Yun
Abstract
The textile industry is an industry that many countries have chosen to foster at the beginning of their industrial development since the textile industry plays an extremely important role in the industrial and economic development of a country, and the cotton textile industry is the most important textile industry. Therefore, this study analyzes how the China''s industrial policies to affect the development of the cotton textile industry at first. First of all, using historical data, this article will examine Chinese industrial policies of the cotton textile industry adopted during 1949-1990 from four angles: institutional reform, the development and education of talent, investment strategy, and technology. It will then compare the Chinese data with the Taiwanese data for the same period, as well as compare the industrial policies implemented during 1949-1978 with those adopted during 1949-1990. This latter comparison will enable us to more clearly see how Chinese industrial policies under a planned economy differ from those under a market economy.
In Chapter 3, we study the extent to which prices were distorted under the plan, using China’s cotton textile industry in 1952-82 as an example. We derive the shadow price of cotton fabric relative to cotton yarn from a distance function and find it to be less than one-tenth of the international price prevailing at the time. This suggests that the production of consumer goods, such as cotton fabric, was severely suppressed in favor of industrial goods, such as cotton yarn, during the plan economy period. However, despite the distortion in terms of quantity of production, the cotton textile sector has experienced respectable technical progress during the period.
From above, we demonstrate that China''s industrial policy has impact on the textile industry, and find the agglomeration seems play an essential role for the development of textile industry. We want to know the spatial concentration of manufacturing activity is able to enhance firm-level productivity in the next chapter. Using a panel dataset of Chinese textile firms from 2000 to 2005, this paper aims to examine the dynamics of industrial agglomeration and the impact of agglomeration on firm-level productivity in China’s textile industry. First, the Ellison-Glaeser (EG) measure of spatial concentration is calculated for each year to examine the dynamics of agglomeration and a slightly decreasing trend of spatial agglomeration is found within the textile industry in China. Secondly, we use productivity regression analysis and find that industrial agglomeration has a positive but nonlinear relationship with the firms’ productivity. Interestingly, the coefficient of the interaction term between the EG index and firm size is significantly negative, implying that a small firm tends to benefit more from the positive externalities of industrial agglomeration.
China''s textile industry always plays an OEM export role, but does it mean they don’t have innovative activities. Do firms located in more innovative areas have higher productivity in China? This paper, in chapter 5, aims to examine the impact of industrial agglomeration and R&D agglomeration on firm-level productivity in China’s textile industry using a National Bureau of Statistics (NBS) enterprise data set covering the period from 2005 to 2007 that contains the innovation data. First, we find that the distribution of spatial agglomeration within the textile industry is relatively concentrated and appears to exhibit an increasing trend. However, the spatial R&D agglomeration within the textile industry exhibits a decreasing trend due to there not being enough Research and Development (R&D) in the Chinese textile industry. Second, firms located in East China appear to exhibit a stronger positive externality effect, thus inducing stronger productivity-enhancing effects on firms located in those regions. This suggests that the government should actively engage in R&D in China because R&D can enhance productivity in such a way that it does not decrease.
Subjects
Textile Industry
Industrial Policy
Agglomeration
Innovation
Productivity
China
Type
thesis
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