EXTERNAL ECONOMIES IN TAIWAN MANUFACTURING-INDUSTRIES

This paper presents estimates of indexes of internal returns to scale and external economies for two-digit manufacturing industries in Taiwa n. Estimating the returns to scale indexes involves using both SUR and 3SLS estimation procedures. The data strongly support the presence of external increasing returns to scale. The findings indicate no eviden ce of internal increasing return in all two-digit manufacturing indust ries. According to the endogenous growth literature, the existence of externalities in production bears important economic implications in s ome aspects of economic growth, even though the data cannot distinguis h the transmission mechanism.