LEGAL ENVIRONMENTS, VENTURE CAPITAL, AND TOTAL FACTOR PRODUCTIVITY GROWTH OF TAIWANESE INDUSTRY

Authors

  • MENG-CHI TANG,

    1. Tang: PhD Student, Department of Economics, Michigan State University, East Lansing, MI 48824. Phone 517-355-7583, Fax 517-432-1068, E-mail tangmen1@msu.edu
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    • *

      We are grateful to Coeditor Robert J. Michaels and an anonymous referee for their valuable comments and suggestions. We also thank Hsiang-Ke Chao and Wen-Hsien Liu for their support from the early stage. We have benefited from presentations of this paper at the 2005 Taipei Conference on Efficiency and Productivity Growth and seminars in National Tsing Hua University and Academia Sinica. All remaining errors are our own.

  • YIH-LUAN CHYI

    1. Chyi: Professor, Department of Economics, National Tsing Hua University, Hsinchu, Taiwan, R.O.C. Phone 886-3-574-2732, Fax 886-3-572-2476, E-mail ylchyi@mx.nthu.edu.tw
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    • *

      We are grateful to Coeditor Robert J. Michaels and an anonymous referee for their valuable comments and suggestions. We also thank Hsiang-Ke Chao and Wen-Hsien Liu for their support from the early stage. We have benefited from presentations of this paper at the 2005 Taipei Conference on Efficiency and Productivity Growth and seminars in National Tsing Hua University and Academia Sinica. All remaining errors are our own.


Abstract

This study provides a new explanation of total factor productivity growth of Taiwanese industry. Besides the channels identified in the literature, this study finds that the venture capital (VC) industry development significantly promotes productivity growth. In addition, an indicator of legal environment has been established to record changes in VC-related legislation during the past two decades in Taiwan. The legal indicator serves as an instrumental variable that can avoid estimation bias resulting from potential endogeneity between VC development and productivity growth. (JEL G24, K23, O47).

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